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Bankruptcy Alternatives Blog
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Saturday, September 27, 2008
What are my bankruptcy alternatives?
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As the North American economy continues to weaken, and every day we read news of bailouts, we get even more worried about our own personal financial situation. What can we do? If you are experiencing money problems and you think that personal bankruptcy is your only alternative, start with our five step program to avoid bankruptcy.
First, make a family budget. If you don't know where your money is going, you can't decide what spending to cut to free up cash to repay your debts on your own. Read our special report on budgeting for more information, and for some free tools to help you budget.
If your budget shows that you can afford it, your next step may be to try to get a debt consolidation loan. With a debt consolidation loan you consolidate your debts and make one monthly payment, at a lower interest rate than you are paying now. You need good credit to qualify.
If you don't have good credit, your next option would be to consider credit counseling through a non-profit credit counsellor about a debt management plan. They may be able to work out a plan where you repay your debts over a longer period of time, at a reduced or zero interest rate.
If that isn't affordable, a legal procedure may be necessary. In the United States you could file a Chapter 13 Wage Earner Plan. In Canada you could consider a consumer proposal. Either way, it may be possible to negotiate a legal settlement where you pay less than the full amount owing.
If even that is not affordable then, and only then, should you consider personal bankruptcy. Bankruptcy is a last resort, only to be considered if all other bankruptcy alternatives have been considered. You have options, so consider them wisely, do your research, and then make the decision that is best for you and your family.Labels: bankruptcy alternatives, Chapter 13 Wage Earner Plan, consumer proposal, credit counseling, debt consolidation, debt management plan
Posted by Bankruptcy Alternatives Blog
@ 5:40 AM
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Monday, April 07, 2008
What if I Just Stop Paying My Debts? Is Not Paying a Good Bankruptcy Alternative?
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At some point in almost everyone's life we get to the point where we just through up our hands and say "Enough: My debts are too high, so I'm just going to stop paying!"
For some people that may be the correct option, but it does have one significant danger: If you stop paying, it is possible that your creditors will take you to court, sue you, and attempt to garnishee your wages. If you own property, like a car or a house, they could attempt to put a lien on your property, seize it, and sell it to repay your debt.
If you currently own no property or have no wages, you are "creditor proof", so doing nothing may be an option. If you get a pension or welfare, it is unlikely that those payments can be garnisheed, so there may be little risk of a garnishment. You could open a new bank account at a new bank that is not known to your creditors, and continue on until your situation changes.
However, if you do have a job, doing nothing is probably not the correct option for you. You need to take action. Try contacting your creditors and working out a repayment plan. If you need help, a credit counselor can meet with to determine if a debt management plan is the correct solution for you. If you still have good credit, a debt consolidation loan is another possible option.
If you live in the United States, a Chapter 13 Wage Earner Plan is a good personal bankruptcy alternative. In Canada, a consumer proposal is an excellent solution in many cases.
The point to remember is that doing nothing may be an option, but there are many other bankruptcy alternatives, so research your options and decide on the option that's best for you.Labels: bankruptcy alternatives, Chapter 13 Wage Earner Plan, consumer proposal, credit counseling, debt consolidation, debt management plan
Posted by Bankruptcy Alternatives Blog
@ 7:37 AM
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Monday, July 02, 2007
Chapter 13 Wage Earner Plans, Financial Counseling, and Consumer Proposals – Which is a better bankruptcy alternative as far as my credit report is co
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It is a common misconception that financial counseling, or consumer credit counseling, is much better than a Chapter 13 Wage Earner Plan (in the United States) or a consumer proposal (in Canada) as far as your credit score is concerned.
In fact, they are all about the same. Each of these options will have a negative impact on your credit report.
To prove this point, we went to the web site for Equifax, the largest credit reporting agency in the world. Equifax explains that information in the Public Records section of your credit report remains on your credit report for 7 years.
What is a public record? Here is the definition of a public record from Equifax:
The 'Public Records' section reports the presence of several types of items on your credit report, including accounts that have been turned over to a collection agency, matters of public record, bankruptcies, and similar items. …The different types of items that may appear in the 'Public Records' section of your Equifax Credit Report™ are:
Bankruptcy A legal agreement in which a consumer is declared fully or partially unable to repay debts. In return for full or partial release from those debts, the consumer may sacrifice some property or agree to a payment plan. There are two different types of bankruptcy for consumers: Chapter 7 and Chapter 13.
Financial Counseling
A voluntary method of debt restructuring in which a person makes a lump sum payment to a financial counseling agency who distributes the funds to creditors. Consumers in financial counseling may have an arrangement to pay all or part of their consolidated debt.
Equifax goes on to state that:
Chapters 7, 11, and non-discharged or dismissed chapters 12 and 13 remain on file for 10 years from the date filed
Accounts paid as agreed remain on file for up to 10 years from the date of last activity (DLA)
In other words, whether you do consumer credit counseling or a Chapter 13 Wage Earner Plan the note on your credit report stating that you have filed the procedure is likely to remain on your credit report for up to 10 years. So which option should you choose?
Since your credit report is likely to be the same in either case, you should use other factors to decide on the correct option for you. In most cases a Chapter 13 Wage Earner Plan results in you paying less than the full amount of your debts owing, and so that may be the preferable option. However, professional advice is recommended, so consult a bankruptcy attorney or credit counselor to help you decide which bankruptcy alternative is right for you. Labels: Chapter 13 Wage Earner Plan, Chapter 7 bankruptcy, consumer proposal, credit counseling
Posted by Bankruptcy Alternatives Blog
@ 6:54 AM
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