What Options Do You Have Before Bankruptcy?

If you are struggling with debt, you might assume filing for bankruptcy is the best option. However, it may be possible to escape suffocating debt without the downsides of bankruptcy. So before you contact a bankruptcy attorney about filing for Chapter 7 or Chapter 13, learn the top 10 bankruptcy alternatives available to you.

1. Stop harassment from creditors: Filing for bankruptcy immediately triggers an automatic stay, stopping all debt collection activities against you. But you can put a stop to debt harassment simply by sending a “stop contact” letter. If the collector ignores your rights, hiring a bankruptcy lawyer to send a more official letter should get the message across.
2. Negotiate a debt settlement: If you are severely delinquent on your debts, your creditors may be willing to accept a partial payment while forgiving the rest. Just be aware that your credit score will likely take a hit, and you may owe taxes on your forgiven debt.
3. Pursue debt consolidation: This bankruptcy alternative combines multiple debts into a single low-interest loan, simplifying your liabilities and allowing for one monthly payment. Before moving forward, know that you may need to offer collateral, which could be seized if you fail to repay the loan.
4. Contact a credit counseling agency: Get help negotiating and repaying your debts to improve your financial picture. This option may lower your interest rates, waive late fees and over-limit fees, and stop collection activity.
5. Sell assets: If you have enough valuable assets to sell, you might be able to reduce your debt enough not to file for bankruptcy.
6. Refinance or restructure your mortgage: If you own a house, contact your mortgage lender about extending the loan period or restructuring your payment plan to owe less each month.
7. Earn extra income: Find ways to earn money on the side to help pay off debts faster, and you could avoid needing to file for bankruptcy.
8. Borrow from friends and family: If loved ones are willing to lend you money, treat it like an official loan from the bank. Put an agreement in writing and commit to repaying your friends and family on time.
9. Lower your living expenses: This may include getting a paying roommate, selling your house, canceling subscriptions you don’t need, and avoiding eating out.
10. Take no action: If you have a low income and few assets, you may be deemed “judgment-proof,” meaning anyone who sues you can’t collect simply because you have no assets they can legally seize. If you think you may be judgment-proof, seek professional legal advice about what to do next.

After considering the alternatives, you may decide that bankruptcy is still your best choice. Get in touch with Richards & Richards Law Firm in Ogden, UT, to learn more about your options. Our experienced bankruptcy attorneys can help you erase debt stemming from job loss, divorce, medical bills, credit cards, and more. Contact us at (512) 461-4836 to schedule your free bankruptcy consultation today.