Nobody wants to file a bankruptcy; in the end it is a very difficult decision that is normally a last resort. There are some alternatives to consider first before you take that final step.

Take the time to list your expenses on a spread sheet or piece of paper. Make a budget that prioritizes your expenses, food, utilities, and mortgage first. Then if you have a car payment that should come next, once you have all your important expenses listed, begin to list your debt.

The purpose of this is to determine how much income you have available for debt repayment, and whether you can make progress with repaying debt. If your current income does not leave room for debt repayment or leaves you with getting behind on your credit cards it is time to consider your options.

Negotiate with Creditors - This will be your first step, not all creditors will negotiate with you, and many will not negotiate with you till you are two or more months behind, you will not know till you ask so do this first. Many creditors are willing to settle for the principle with a small amount of interest, simply to recoup the money they lent you. Often creditors will settle for 2-4% interest on a 2-5 year contract. Many credit card companies will not tell you about this till you are already delinquent so depending on where your finances are at, this may or may not do you any good.

Credit Counseling services - Debt repayment programs are not the same as credit counseling services and should not be mistaken for them. Often Debt repayment programs are nothing more than a scam, they entice you to sign a contract promising to reduce your payments when in fact many creditors will not work with them. Instead research carefully, check with the Better Business Bureau to find a Counseling agency that will work with you to create a payment plan you can afford. You can also go to http://www.usdoj.gov/ust which keeps a state by state list of US Trustee approved credit counseling agencies that you can contact.

Doing Nothing - This may seem like an unlikely alternative but more and more people are caught between a rock and a hard place and are choosing this option. Many cannot afford the costs of the new bankruptcy laws which have tripled the cost of a bankruptcy, require counseling at your expense, and can have a lengthy waiting period. If you are in a place of choosing between paying for food, heat, or housing and paying credit cards, it is pretty obvious what you should choose. While nobody is telling you to irresponsibly choose not to pay the bills you incurred, we live in tough times and if you have little or no income coming in, you take care of basic necessities first.

If you live simply and are not extravagant, then your chances of being sued are very small, and what the creditors are able to take from you is limited, they cannot take the roof over your head, things you need to hold a job, clothing or any of the basic necessities of life. This will affect your credit rating but no more so than a bankruptcy, and if bankruptcy is not an option because of costs then this is an option you may have to consider.

Creditors and collection agencies are very limited in what they do in terms of harassment, so be sure to read up on your laws and let them know you know your rights.

Nobody wants to be in the position of not being able to pay their bills, with so much at stake such as our reputation and credit rating most of us would rather pay our bills then let them get behind. In the end though it is not the end of the world and you do have alternatives no matter where you are at in life. Knowing your alternatives and rights is the key to dealing with this situation, and certainly if you can pay, pay what you can but be sure to feed your family and keep your home warm, then and only then should you worry about the creditors. For more articles like this bookmark www.PersonalBankruptcyAlternative.com

Author: Patty Getz

Alternatives to Bankruptcy

Bankruptcy is a legal term that means the inability or impairment of ability of any individual, organization, or business to make payments to their creditors. The process of bankruptcy allows the affected party to discharge most of its debts, but the disadvantage is that it is very difficult for the bankrupt individual, organization or company to borrow in the future. If you want to avoid the negative effects of bankruptcy, then you must look at the various bankruptcy alternatives that are available out there.

Taking No Action

If a company declares bankruptcy or for that matter even an individual then the creditors won’t be able to obtain a judgment against them. A judgment enables creditors to not only seize certain types of property but also garnish wages etc. There are common cases wherein debtors have no wages to their name, neither any property and hence a judgment won’t affect them in any way or form.

Debtors with no assets will have no creditors initiating action against them as there is absolutely nothing for them to gain. After enough time has passed the debts incurred by the debtor will be removed from the credit history. ‘Taking no action’, is a good idea if there are no assets or income for the creditor to garnish. Don’t declare bankruptcy and take no action.

Self Management of Money

Debt is a direct result of spending more than you can afford or more than your revenue or income. If this debt needs to be reduced, then it would be a good idea to manage existing capital in a careful manner and reduce the monthly spending. For this to happen, it is advisable to create a personal budget wherein one needs to analyze expenses and identify areas that would reduce expenses.

Creditor Negotiation

Creditors are intelligent and understand the reason for the debtor thinking about the bankruptcy option. The reason being, that they are saddled with excessive debts and think that they have no other option but to declare bankruptcy. All creditors want at least a portion of their money back, and hence are quite willing to strike a deal with the debtor through negotiation of the settlement. At least through negotiation there is hope that they will get some amount of money, but if the debtor declares bankruptcy then their money is all but lost to them.

Negotiation is a good alternative if as a debtor you have sufficient income or you have some assets that can be liquidated, and whose proceeds can then be used to get rid of the debt.

Restructuring the Debt

This is a popular bankruptcy alternative, which involves a private company or a sovereign entity that is facing the problem of cash flow or is in financial distress, to not only renegotiate upon its delinquent debts but also reduce them. This helps in the restoration of the liquidity or also the rehabilitation of the company, so that it can continue its operations.

Author: Parbhat Kumar

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