Bankruptcy Alternatives

How do you know if bankruptcy is right for you? Bankruptcy alternatives do exist and sometimes can help people. Consider these non-bankruptcy alternatives before you decide.

Your priorities are important

You must determine what your priorities, needs, and goals are before you choose a course of action. Do you want to pay debts and taxes that may be wiped out in bankruptcy? Or, use your money to pay your mortgage, taxes, car and student loans and buy essential goods and services?

Paying your debts

Make a plan to get control and manage your finances. Create a realistic monthly budget. Include every dollar that you currently spend including all one-time payments. Compare the total of your monthly living expenses to the total of your net monthly income from all sources.

Do you have enough money to pay all your bills and secured debts such as your mortgage and car loan? If you can't pay off your existing credit cards, taxes, student loans and other unsecured debts in full within the next three years, you may want to consider bankruptcy or non-bankruptcy alternatives.

Decide who you are going to pay first and when

Rather than paying debts that would be discharged, consider using your money to pay debts that won’t be eliminated in bankruptcy. All too often we see clients who have paid credit cards, taxes and other unsecured debts using their income, savings or money from their 401(k) or other retirement plan that may be fully protected in bankruptcy. You can avoid this happening when your debts and taxes can be eliminated in bankruptcy.

You want to see a bankruptcy lawyer as soon as you run into debt or tax trouble to minimize your financial damage and maximize your income, savings, retirement money and property.

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Debt relief and tax relief settlements

You may be able to negotiate a discount on your debt or taxes either on your own or by working with an experienced bankruptcy attorney. You may find that you can pay less than the actual balance due. Under this arrangement you usually have to pay a lump sum amount although your creditor or the IRS may agree to an installment plan, sometimes at no interest.

Obviously, there are certain precautions that you need to take before you enter into any such arrangement. If debt relief is the goal, find out if you will have to pay income taxes because of the settlement. The amount of debt that is forgiven by your creditor may be taxable to you. However, you will not pay taxes when you file bankruptcy and eliminate the debt. Talking with us will help you to determine if discount settlements are in your best interest.

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Beware of debt relief through debt consolidation
and repayment plans

Listen to television or radio ads or go online, and you will find hundreds of companies that say they will help people just like you with overwhelming debt or taxes. You may be better off without their help and services. Many debt relief, management and repayment programs fail to do what they advertise. They do not settle your debt for pennies on the dollar.

We have had clients who consulted us after paying money to a debt management or settlement company only to find that the payment plans were unworkable, their money gone and they still had debts to pay. Even if you find a company that actually pays a portion of your debts under a plan that is acceptable to all of your creditors, you may end up paying income taxes on the amount of the debt that is forgiven by your creditors. You will not pay taxes on debt that is eliminated in bankruptcy.

Many clients find out that filing a bankruptcy case is less expensive, faster and gives them a better result than the arrangement they entered into with a debt management or settlement company. To eliminate your risk of spending money on unwanted services we offer you a free consultation with no obligation to you.

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Loan modifications

You may be able to work out a plan with your secured lender to make your overdue payments on a mortgage, car or business loan over a period of months or years. Your lender may agree to modify the terms of your mortgage or other loans and reduce the principal, interest and monthly payments. Loan modification may occur at any time before there is a foreclosure or sale of your property even after you file for bankruptcy.

Can you do this on your own? Yes, but it can be very time consuming, frustrating and complicated and you may not get the results you want. Many homeowners' requests for loan modifications are rejected. You may not want to spin your wheels trying to get a loan modification when you can consult with us to determine if it is even advisable for you to do so.

Surrendering your property

If you can no longer afford to pay the mortgage on your home or commercial real estate, business or other secured loans, you may want to surrender the property to your lender and file bankruptcy, particularly, where your property or business assets have less value than the balance due on your loan. You may discharge the loan and not owe any income tax as you might under a deed in lieu or "short sale" of your home or other real estate.

If these alternatives are not possible, consider bankruptcy.
There is no magic formula that tells you whether
bankruptcy is the best choice for you.
An experienced bankruptcy lawyer is your best resource.

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