Alternatives to bankruptcy
Can doing nothing for a while be considered a bankruptcy alternative When faced with big financial trouble, many people lose their nerve and simply start avoiding their creditors. In their heart of hearts, these persons do realize that their financial situation is bad and may lead alternatives to bankruptcy, but still they choose to think that by giving their creditors a miss, the debt problem will somehow just diminish on its own. Some call it the ostrich method of avoiding bankruptcy, and just the way an ostrich always fails to save himself from his enemies by this method, for people with debt trouble, this method hardly ever works.
The first thought that comes to mind on hearing about such an approach to financial problems is that it should always be avoided. However, a little more exploration is required before rejecting this approach outright.
What exactly the term doing nothing means in the given context
This means that for the time being you have decided to do nothing with the creditors. But this in no way means that you will now simply forget about your desperate financial situation temporarily and wont keep planning and preparing for alternatives to bankruptcy the day when you will have to deal with your bad financial situation and your creditors directly.
If your creditors are waiting for some response from your side and you have decided that not interacting with your creditors is your best option for a while, then what the creditors are likely to do Well, that will depend a great deal on who your creditors are, and whether your obligations are secured or unsecured. In the worst case scenario, creditors will take away everything you own i.e. your cash, your house, your car and even if after taking away all this, there is still some debt left; they can come after you again. In the best possible scenario, they will leave you all alone for a while and will wait patiently for you to contact them. However, such a rosy picture is highly unlikely to emerge. What really happens is that if the creditor has a first priority interest in a secured asset and you do nothing to pay off that debt, rest assured that you will lose that asset. Simply put, stop making mortgage payment and you will lose your house. Stop making car payment and prepare yourself to say goodbye to your dear car.
So then, a point emerges. When faced with a difficult debt situation and thinking about doing nothing with the creditors for a while, the thing to be considered alternatives to bankruptcy is: how long will it be until you lose your asset Unfortunately, there can be no standard answer to such an important question. In some cases it may take only a few months from the first missed payment for you to lose your asset. In another case, it may take many years. A very good way of ascertaining how long your creditor is likely to wait before deciding to take a few drastic steps is to miss a payment or two and see how hard the creditor pursues you. This will give you a pretty good idea!!!!!
Possible scenarios in which a doing nothing strategy can be seriously considered.
* Statute of limitations cases.
* Situations where you need some time to decide the correct future course of action.
* Where legal asset protection must be done before facing off a creditor.
* Statute of limitations: Most states have laws which stipulate that if a creditor has not taken any action to collect on their debt within 6 years of the last payment made by the debtor, then they cannot bring any action in court. So, if there is a debtor who has not made any payment during the last five tears to pay off a debt and has still not heard from his/her creditors, then doing nothing is certainly the best choice available to him/her. Just a few more months of doing nothing and the debt will become unenforceable! One small point, though. Just because your creditor somehow failed to enquire about the debt for six years doesnt mean that your debt has just vanished, its the right of the collector to collect the debt in court that is now gone. But since you still owe the money, it will remain on your credit report for another year. Sometimes the collectors may choose to pursue you even after this six year period thinking that you may not know that they can no longer pursue you in court. In such cases, once you make them aware that you know that the statute of limitations has run out and dont want to make any payments now, in all likelihood they will leave you alone.
* There may be cases where a person needs more time to decide exactly what to do. For example, a person has lost a property to foreclosure and is not sure whether he will still be pursued for the deficiency. So the best course of action will be to wait a while and see how collection activity starts or how the income picture improves. In another example, someone might be between jobs and his/her future remains unclear, then it may serve him/her well to just wait a while before electing a particular course of action.
* In some cases a pre alternatives to bankruptcy planning and asset protection can be done but it is legal only if it is done right, otherwise it could be illegal. To pursue this path, its necessary that you get yourself very good debtor representation.
All said and done, it can be said with certainty that doing nothing is only a very temporary measure and should be viewed as such. If you have already missed three or more mortgage payments, then you have most probably already utilized your entire time-limit of doing nothing. Now it is in your interest to quickly start exploring other options, before it becomes too late. The first step is to start working with an experienced debtors attorney. Secondly, dont spend any money that you can save. And then, with the help of your attorney, start exploring other options such as debt workout.
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