Bankruptcy alternatives
When a person finds it hard to repay his/her debts and the creditors start becoming more and more impolite, at times almost threatening, a possible alternative that starts emerging in ones mind is filing for bankruptcy. Many people tend to view bankruptcy alternatives as a means of getting rid of their debt forever and start afresh. However, starting afresh may not turn out to be all that easy.
In a Chapter 7 bankruptcy, your debts are discharged through the bankruptcy court and they are gone forever. Using any option other than bankruptcy will involve paying at least some money to your creditors even if the final deal requires you to pay just pennies on the dollar. A Chapter 7 bankruptcy case can be filed in days and it generally finishes in four to eight months. In case of a Chapter 13 bankruptcy, it may take months for a plan to get approved and then about three to five years for that approved plan to be implemented completely. However in case of Chapter 11 bankruptcy, it will most likely take some years for plan approval and an even more number of years for that reorganization plan to be carried out.
No matter how bad your financial situation may have become and how seriously you may be thinking on the lines that bankruptcy is now the only way out for you, make no mistake about it, bankruptcy alternatives is the worst thing possible on your credit report. And therefore, once you have filed for bankruptcy, it will take a while before your credit will get back on track. If you are thinking how long this time-period is likely to be before you can reach a point where you can again get a regular credit card, mortgage, or auto loan, the answer is this will most likely depend on how aggressively you will try to get your credit back on track, but it will take not less than 1-3 years after bankruptcy for you to be able to get a loan with terms more or less same to those offered to someone who has never filed for bankruptcy.
However, there are companies from where you can get a secured credit card or may be a mortgage with a low loan to value (LTV) and high interest rate. Some lenders may offer you these services while you are still in the middle of your bankruptcy alternatives proceedings. To find out more about such services, study carefully the offers of lenders who provide bad credit loans or loan for people with bankruptcy history.
As bankruptcy will show its adverse affects for many years after you filed for it, it is always a good idea to treat bankruptcy as the very last option, to be exercised only when really desperate times are calling for really desperate measures. As far as possible, every effort should be made to avoid bankruptcy.
In this context, it should be noted that its not a very bright idea to consult a bankruptcy lawyer, in case you are experiencing debt related difficulties, to find out how to avoid bankruptcy. After all, a bankruptcy lawyer will want more and more people to file for bankruptcy, so instead of educating you about ways and means of avoiding bankruptcy, a bankruptcy lawyer may end up presenting such a picture of your credit situation which appears much grimmer than what the real situation is!!
Debt Workout as an alternative to bankruptcy.
Wherever possible, a debt workout should always be considered as a preferred option compared to bankruptcy.
What is a debt workout
In a debt workout arrangement, your attorney will contact your creditors and will reach such a deal with them under which you will be required to make some payments to your creditors, but this amount will be less than what you originally would have paid and this lower payment will be deemed enough to settle your account in full.
In another arrangement, you will be required to pay the full amount to your creditors but this payment will be stretched over a longer period of time than originally planned. In another variant of this debt workout arrangement, you will be required to pay a smaller settlement figure now and you can make the rest of the payment over time.
A debt workout is beneficial to both the debtor and the creditor.
Creditors generally agree to a debt workout settlement. The reason is pretty simple most of the debtors who are looking for a debt workout can classify as candidates for bankruptcy alternatives. If the debtor indeed went ahead with the filing of bankruptcy, the creditors, in all likelihood, will end up either with very little or nothing. So by agreeing to a debt workout plan, creditors can at least derive satisfaction fro the fact that they are getting more than they would have got had the debtor filed for bankruptcy. A debt workout is always better than bankruptcy from a debtors point of view as well. If you filed for a Chapter 7 bankruptcy, it will remain on your credit report for 10 years. Even after that period, you may be required to report the bankruptcy on some financial statements. Apart from these credit scars, bankruptcy usually involves emotional scars also. A debt workout thus turns out to be a nice way of avoiding these emotional and credit scars.
If you possess hard assets, such as real property, a debt workout will enable you to retain greater control over these assets and will also increase the chances of you keeping these assets if that is your wish. With a debt workout, you can keep or control your soft assets, such as cash, also.
However, whether it is a debt workout or a bankruptcy, these are major actions which will affect you for many years. Therefore never take these actions lightly and make sure that an experienced, reputed attorney is handling these matters on your behalf. Also make sure that the attitude and philosophy of you and your attorney are compatible and make you comfortable. The choice of the attorney may turn out to be a much more important decision than you expected.
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