Alternatives To Filing For Bankruptcy

Bankruptcy is a complex legal process that may make filing for bankruptcy very difficult, especially since the recent changes to the law were enacted.  The process requires that a person ask the court to make a legal determination (a judgment) that the person cannot pay for the financial commitments they already have.  The court looks at your ability to pay these outstanding debts and bills.  The process may be costly, and even though a seemingly 

large amount of money is spent on the process, there is no guarantee that the court will grant the requested judgment.  The court may deny your request if it believes you still have the ability to pay your obligations.

 If the court grants the bankruptcy request, you are not completely off the hook for some obligations, however.  Child support, student loans, alimony and taxes that may be secured by liens are always going to remain your responsibility. 

Bankruptcy gives an immediate relief for your debts, but the consequences of that relief will follow you for up to 10 years.  This is because bankruptcy can remain on your credit history for that long and will make it very difficult to get a new mortgage, loan, or possibly even a credit card.  In addition, some professions, such as law, may view your bankruptcy in a negative way, as a character flaw, for admission to the bar. 

Alternatives

Even though you may feel overwhelmed by your present financial circumstances, there are alternatives to bankruptcy.   Talking with your creditors may save you a lot of money by giving you an opportunity to stretch out your payments, or by negotiating a better interest rate.  These mechanisms will provide extra time for you to get your finances in order.  Many non-profit organizations provide this type of assistance for free. 

For those who do not have large debt from over-spending, but struggle with making ends meet on a month-to-month basis, or for those who find themselves suddenly without a job and income, bankruptcy is really not the answer.  These problems require an immediate financial assessment.  You’ll need to figure out exactly what your financial situation is – how much you need to live on and how much you owe and then determine how much you can pay and whether you can pay off your debts in other ways.  The reason bankruptcy is not the answer for these problems is that the court is going to make you do these maneuvers anyway, such as trying to negotiate with your creditors, but bankruptcy  it will cost you more money, and you already don’t have enough. 

Alternatives to Bankruptcy:

Cut your expenses to a minimum –

·      What do you really need? 

Can you cut food costs by eating more nutritiously at home instead of fast food or eating out?

Do you really need to buy those clothes new?  Or at all?

Would a less expensive item function as well?

Cut up your credit cards, if you abuse them

 Create a strict budget and stick with it

Be aware of other sources of income – extra work, better job, help from family members

Talk to your creditors & follow through with any arrangements you agree to

Explore a consolidation loan – be sure to carefully screen this possibility by using a federal bankruptcy approved free agency.  http://www.uscourts.gov/bankruptcycourts/approvedagencies.html

 
Filing for bankruptcy today is no longer the get out of debt free card it may have been in the past.  Today, filing for bankruptcy simply means you will have to repay your creditors on a different schedule than you originally agreed to.  However, you can avoid the hassles of bankruptcy, the stigma of bankruptcy, and the costs of bankruptcy by setting up a livable budget and finding ways of paying your creditors yourself.  You can turn your financial situation around, but it will require hard work on your part and a long-term commitment to keep your finances under control.

Resource:  http://www.uscourts.gov/bankruptcycourts.html