Bankruptcy Alternative Services
The downturn in the economy and rising consumer debt has caused the number of Americans filing for bankruptcy to grow. According to the Administrative Office of the U.S. Courts, there were over 520,000 bankruptcy fillings in the first half of 2008. Bankruptcy is a federal court process that helps consumers remove their debt in bankruptcy court. With the power of the federal court behind a consumer, he no longer has to deal with the stress of the collection agencies’ harassing phone calls. Bankruptcy is a serious financial situation that stays on your credit history for 7-10 years. This can affect your ability to purchase a home, car or take out a loan in the future. There are alternatives to filing for bankruptcy if you are willing to be patience and negation with collection agencies, banks, and creditors.
There are two types of bankruptcies: 1.
Chapter 7-allows you to have a fresh start when your debt load is out of control. This type of bankruptcy is also known as asset liquidation. You sell all non-exempt property and use the money to pay off debt. This is the last choice if you are in severe finical straights. It’s best to take this option if you no longer have an income. Chapter 7 bankruptcy remains on the credit report for 10 years and has the potential to interfere with employment opportunities. There are new federal guidelines that make it more difficult to file for chapter 7, but once you have qualified and filed, all lawsuits, liens and wage garnishes stop.
Chapter 13- You can repay your debts with little to no interest using whatever income you have or may have in the future. This type of bankruptcy is also known as restructuring. You are protected by the courts and cannot be harassed by collection agencies. It stays on your credit report for 7 years and usually does not affect employment possibilities. Just like in Chapter 7, the federal court stands behind you to stop harassment by debt collectors.
Alternatives To Chapter 13 Bankruptcy: 1. Debt settlement-You can hire a company or you can negotiate with the lender yourself. In debt settlement you or your representative negotiates with creditors to lower the amount owed on a debt. You end up settling for paying off the debt for less than you owe.
2. Credit counseling services-You or a credit counselor negotiates with a bank or credit card company to reduce the interest rate on debt. This will lower your payments or can be rolled into one low interest lump payment.
Bankruptcy is a path no one wants to travel but there are ways to avoid it to find financial peace again.
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