What are the Alternatives to Bankruptcy?

When you are neck deep in financial debt, filing bankruptcy is one option to obtain some concession and start over. While bankruptcy is a legitimate solution for money troubles, it is usually wise to consider it as your last resort. Sometimes our financial situation is not as bad as it seems; plenty of other options are available to achieve economic stability. Take a deep breath and see where you stand; write down names of your creditors and the money you owe them, your total household income, your overall savings, unpaid bills, and all the assets you would be willing to liquidate.

Before you make up your mind about filing bankruptcy, consult Bankruptcy Attorney in Orange, CA or a professional financial advisor. They can help you understand the true extent of your monetary problems and devise the best way out. Here are a few alternatives you may find more befitting:

COUNSELING & DEBT MANAGEMENT

A debt counselor can help you pinpoint ideas for lowering what you owe, based on your unique situation. It is possible that you made a number of errors in doing taxes and breaking down your debts, which could free up some extra money. Debt can be managed in different ways; you can do it yourself by utilizing any disposal income appropriately, or you can let a professional firm do it for you. Companies that deal with debt management take your place to negotiate with the creditors; this approach may lower your interest rates, waive late fees, and stop collection activity.

DEBT SETTLEMENT

While debt management involves paying everything you owe over time, debt settlement includes a degree of creditor forgiveness. This is a viable option if you are far behind on your debt payments and the total amount is huge. Reaching a settlement with your creditors may discharge a considerable portion of the money you owe. The bad news is that your credit score will likely take a hit, and you shall still owe taxes on the forgiven amount.

DEBT CONSOLIDATION

Debt consolidation is the act of combining multiple debts into a single loan. This route simplifies your liabilities, allowing you to make one payment per month instead of several. Debt consolidation loans are known to provide low interest rates and a convenient payment schedule. Be aware that you may need to offer collateral against the scheme; the asset you assign as collateral could be seized if you default on the loan.

ASSET LIQUIDATION

Part of the bankruptcy process includes liquidating your assets to pay off creditors. You can do this yourself by simply selling or auctioning belongings you no longer need; have a garage sale, put your stuff on online commerce platforms, trade stocks or bonds, and so on. Some quick cash might be all you need to put a large dent in the amount you owe. The less than ideal options are to replace a big home or an expensive car with something cheaper, yet practical.

LIFESTYLE CHANGES

Your spendthrift or bourgeois nature could be the sole reason you are going broke. You will just have to break old habits and start living on a budget. You might need to stop eating out every day, start making coffee at home, forego vacations, shop at thrift stores, and cancel a few luxury subscriptions. Letting go of an extravagant lifestyle is hard, but you will eventually embrace ‘slumming it’.

NOTHING TO LOSE If you are unemployed, possess none to negligible assets, don’t own a home, and lack all financial means to pay off your debt, you may be deemed "judgment-proof." This implies that no one who sues you will be able to collect compensation because you have nothing that the law could confiscate. Creditors cannot and will not be interested in taking away ordinary clothing, basic furnishings, or food from you. Social security, public assistance, or unemployment benefits cannot be seized either. If you consider yourself judgment-proof, seek legal counsel for advice about what to do next.