A quick search on the Internet yields a great deal of information discussing alternatives to bankruptcy protection. The issue is clearly an important one, because bankruptcy is a big financial step to take, even for those who carry a burdensome debt load.
Perhaps you are not eligible to file a bankruptcy, or are unable to because of significant assets that you cannot readily liquidate. People might be afraid of their credit score dropping if they file, although many times these fears are unfounded (https://www.millermillerlaw.com/Practice-Areas/Credit-Repair.shtml) . Depending on the type of bankruptcy, a debtor may also lose property in the bankruptcy process. While we always recommend seeing a lawyer for a free consultation before deciding what route to take, we do know that bankruptcy is not right for everyone, and many debtors consider bankruptcy alternatives before going ahead with a filing.
There are a variety of debt relief options that may make sense for a debtor. In addition to making lifestyle changes that reduce costs and liquidating assets for cash, several common alternatives are:
- Credit/debt counseling: a debtor works with a debt counseling company to get their finances under control. May involve establishing a debt management plan, in which regular payments are made to the company, which then negotiates with and pays creditors. Often results in lower interest rates, waiver of late and over limit fees, and relief from collection activity.
- Debt settlement: a debtor works directly with creditors to negotiate reduced payments or to reduce overall debt. This can still result in a decreased credit score and can have income tax consequences, but can help a debtor save money.
- Debt consolidation: a debtor consolidates several debts into a single loan to make it easier to pay and possibly reduce late fees.
In our next post, we'll look a bit at another option that may be available to Wisconsin debtors.