What are the alternatives to Bankruptcy?

If you are struggling to make ends meet and your debt situation is getting worse every day, filing bankruptcy has probably crossed your mind. Many individuals and businesses have successfully turned a new leaf following bankruptcy, so it could be the same for you. However, everyone’s money problems are unique, which is why you have to be sure if bankruptcy really is the right approach for you. Bankruptcy is only pursued as the last resort, it can be expensive, and has a few major setbacks, such as a sharp decline in your credit score. Your financial troubles might not be as bad as they seem, and that is why less formal alternatives to bankruptcy exist.

Michigan Bankruptcy Attorney can help determine the best course of action to resolve your economic issues and overcome crippling debt. One of the following alternatives to bankruptcy could be the answer to your dilemma:

1. Debt Settlement

Debt settlement involves negotiation with those you owe money. If you have colossal amounts of debt in your name, you may consider speaking to your creditors about a concession. Debt collectors who have been chasing you for quite some time should be willing to reach an agreement because they would prefer a percentage of the outstanding payment rather than getting nothing. Creditors know that if you file bankruptcy, there’s the possibility of losing the opportunity to recover anything at all. An experienced bankruptcy attorney can assist you in reaching a reasonable settlement. In most cases, interest and surcharge is waived off, and the remaining amount is paid in lump sum.

2. Debt Consolidation

Debt consolidation is recommended for anyone having multiple consumer debts and a good credit score; if your score is less than 650, this strategy is no good for you. It is essentially the taking out of a new loan to pay off all debts collectively. This form of debt financing reduces interest rates and allows you to pay off debt in more manageable installments. You are required to offer collateral against the loan, which will be confiscated if you don’t fulfill the terms of the debt consolidation plan.

3. Exhibit Judgment-proof

If you are literally broke and unemployed, you shall be viewed as judgment-proof. This means that all your assets are either exempt or not worth anything considerable. Therefore, if a creditor sues you, they will not be able to gain anything because you are financially insolvent.  Debt collectors cannot claim or garnish retirement funds, social security benefits, unemployment aids, or money received from any government welfare program.

4. Debt Management

Many people suffering from debt problems simply lack proper financial management skills. A financial expert or advisor can help them sort out the mess and make better economic choices in the future. For example, you might be doing your taxes wrong and relying on payback schemes that are not cost effective. Sometimes, a change in lifestyle and conscious budgeting can free up a handsome amount of money that may go towards paying off debt. A financial management course and professional counseling might be all you need to start a new.

5. Liquidation of Assets

If you are in possession of valuable assets having resale value, you could auction them and use the money to compensate your creditors/ pay off a big chunk of your debt. If you file for Chapter 7 bankruptcy, the bankruptcy trustee will liquidate your non-exempt property anyway. Liquidating assets by yourself shall save you time and money. 

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