What Is Bankruptcy And Why Explore Alternatives To Bankruptcy
Bankruptcy allows individuals and businesses gain a fresh start by having their debts discharged or restructures. Most people can file bankruptcy, however, you may be ineligible based on assets, transfer, prior bankruptcy filings, or having a household income above the medium income based on the Internal Revenue Service guidelines . Other times, individuals and businesses choose to not file bankruptcy for personal reasons. There are alternatives to explore including debt settlement, business and corporate wind-down, defense litigation, debt negotiation and restructuring, and more. Call our attorneys at Gregory K. Stern, P.C. to discuss your options.
An Informal Arrangement Or ‘family Arrangement’
If you know that you cannot pay all your debts, you could consider writing to your individual creditors to see if you can reach some compromise. Include a timetable of when you will repay them. The disadvantage with an informal arrangement is that it is not legally binding so your creditors could ignore it later and ask you to pay in full. Your local Citizens Advice Bureau can advise and help you make this kind of arrangement.
How Do I File For Bankruptcy
If you owe more money than you are able to pay, you can apply for bankruptcy online. Each case is judged on an individual basis by an adjudicator. The cost to the person applying for bankruptcy is currently £680, which means you must be able to afford to declare yourself bankrupt! The process cant be completed until full payment has been received.
Once payment has been received and your application for bankruptcy has been reviewed, you will be declared bankrupt by court order. Before you do this, its important to weigh up all the options available to you, because once proceedings are in progress theyre difficult to stop.
If you owe money to creditors and havent been able to pay them back, your creditors are also able to file for bankruptcy on your behalf. They can do this with or without your permission.
For creditors to do this, you must owe them a minimum of £5,000. Creditors can force bankruptcy upon an individual owing them a large sum of money in order to try and reclaim money owed to them. Once bankruptcy has been applied for, the proceedings are essentially the same in either case.
Worcester Debt Relief Lawyer Finding Solutions That Work For You
Bankruptcy is not always the best solution if you are struggling with debt or beingharassed by creditors. Anyone who is contemplating filing forChapter 7,Chapter 11, orChapter 13 bankruptcy should understand the consequences of doing so, especially as it affects your credit rating and even your social standing. Filing for bankruptcy should be carefully considered before you take the leap. Other alternatives to bankruptcy should be explored as well, based on the particulars of your financial situation.
AtMorrison & Associates, I have provided both bankruptcy and bankruptcy alternative actions for clients throughout Massachusetts for over 20 years. Asa full-service Worcester bankruptcy lawyer, I am well-versed in all of the available strategies for handling debt relief. Your first step is to take action by consulting with me concerning your unique financial dilemma so that we can determine the right way to resolve it for you.
Explore your debt relief options by contacting Morrison & Associates at 928-3038 or through theonline message form today.
Which Alternative Is Best For Me
If bankruptcy isnt suitable for you, the best alternative will depend on your personal situation.
If you owe less than £5,000, an administration order would be the best alternative for you. Its a relatively painless way to pay back smaller debts over a longer period of time.
If you owe a larger sum of money and owe that money to multiple creditors, a debt consolidation loan and debt management plan can get you back on track, without having to go through bankruptcy and all that it entails.
If you want to avoid bankruptcy and keep your property and assets, then an IVA could be your best option.
In certain circumstances, declaring bankruptcy could be the best option .
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Your Credit Report & Bankruptcy In Canada
Legally eliminating debt through bankruptcy seriously impacts your credit rating and makes it hard to obtain credit later. You need to show creditors why they should trust you enough to lend you money again. Not being able to renew your mortgage, get a loan or apply for a low interest rate credit card often impacts other financial plans and puts your life on hold.
Tax Consequences Of Settling A Debt
In some cases, if a debt is canceled, forgiven, or discharged for less than is owed, the amount of the forgiven debt is taxable. The IRS generally considers canceled debt of $600 or more as taxable, and settling debts for less than you owe can increase your tax liability depending on your tax bracket and the canceled amount.
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Other Ways To Obtain Debt Relief
Bankruptcy is not the only answer. In fact, there are several options thatChicago bankruptcy lawyer Joseph P. Doyle can discuss with you so you can make the decision that is truly best for you. Some law firms just want to do whatever they can to ensure you use their services to file for bankruptcy.
At our firm, we want to help you make your own choice, even if this means you do not choosebankruptcy. It is important that you do what you think is best for your needs, your finances and your future. The particular alternatives to bankruptcy that you can consider may affect you and vary on a case-by-case basis.
Your potential alternatives to bankruptcy may include:
, debt consolidation anddebt settlement are alternatives that can be used to avoid bankruptcy. Credit counseling from an approved agency is actually a requirement that must be completed within 180 days prior to filing.
This process can potentially give you an objective point of view about your financial situation, possibly even showing that it can be resolved without bankruptcy.Debt consolidation involves getting one larger loan to pay off all creditors. Debt settlement typically involves unsecured debt. It is a process in which the debtor or a representative of the debtor negotiates with the creditors in order to establish a payment amount that is less than what is actually owed.
Alternatives To Bankruptcy And How They Compare
- Alternatives to Bankruptcy and How They Compare
If youre an individual in dire financial straits and no longer have the funds to pay off your debts, you can declare yourself bankrupt.
Bankruptcy is one way to clear debts . But its not necessarily the best thing for everyone.
Always seek expert financial advice from an insolvency practitioner before you decide to declare bankruptcy, because these alternatives might be a more effective option.
Heres our guide to the best alternatives to bankruptcy.
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The Best Alternatives To Bankruptcy In Canada
Bankruptcy is a frightening part of debt. But while most Canadians have a good idea of how bankruptcy works, they often dont know that there are tons of great alternatives to bankruptcy in Canada. By the end of this article, youll know:
- The best alternatives to bankruptcy plus the pros and cons of each option.
- Concise explanation of the structure of the debt industry. If you understand this, youll be able to evaluate different advice and options better.
- A better understanding of the help available for Canadians experiencing financial hardship.
This advice is based on my own experience in the industry and contains the same options that my company has used to help thousands of families, businesses, and individuals build a plan to get out of debt.
When faced with looming bankruptcy, here are the best options for avoiding bankruptcy.
Work Out Settlements With Your Creditors
If you have some income, savings, or assets you’re willing to sell, you could negotiate with your creditors to reduce your debts rather than filing for bankruptcy. Many creditors will agree to settle debts for less than is owed.
Settling your debts for less than you owe or working out a repayment agreement is similar to what happens in a Chapter 13 bankruptcy, but won’t hurt your credit as much. A negotiated debt will still show up as settled in your credit historyunless you work out a deal for the creditor to report it differentlybut a settled debt harms your credit far less than a bankruptcy does. If you’re uncomfortable negotiating with creditors on your own, you can seek help from a nonprofit credit counseling agency. Be sure to choose a legitimate counseling agency. Avoid for-profit debt settlement and credit repair scammers. Or get help from a debt settlement lawyer.
Type Of Debt Is Critical
The type of debt you have is a very important factor in whether you may have good alternatives to bankruptcy. For example, there is a big difference in dealing with 1 credit card with a $5000 balance, versus dealing with 10 payday loans totaling $5000. Your chances of settling 1 credit card is far greater than settling 10 paydays loans, not to mention the dramatically different interest rates. The attorneys at Beutler Law Offices will help you determine the types of debts you are dealing with, and will discuss possible alternatives to filing for bankruptcy.
Alternative #: Debt Consolidation
If you’re struggling to keep track of multiple debts at varying interest rates, you may want to consider taking out a loan to consolidate your debts into one monthly payment, typically at a reduced interest rate.
You may be a good candidate for a debt consolidation loan if you have a decent credit score and your monthly budget allows you to make the monthly consolidation loan payment. Keep in mind that a co-signer may be required to guarantee your loan.
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What Are The Alternatives To Bankruptcy
If you are unable to repay your debts and believe that bankruptcy may be the only option for you, you may be pleasantly surprised to learn that you could still be eligible for a number of other debt solutions that could help you to avoid the serious consequences of bankruptcy.
Alternative debt solutions include:
Individual Voluntary Arrangement : This is a legally binding arrangement between you and your creditors that allows you to make affordable debt repayments across a set period, normally five to six years, after which time any outstanding debts are . An IVA allows you to keep your assets such as your house and vehicles.
Debt Management Plan : This is an informal arrangement allowing you to make reduced payments to your creditors based on your level of disposable income after your priority payments and living costs are taken into consideration. The DMP lasts until you have paid all of your debts in full. Its worth bearing in mind that because this is a voluntary agreement on both sides, your creditors could still take legal action against you to try and recover outstanding debts.
Debt Relief Order : If you have assets of less than £1,000, and a surplus of less than £50 per month, and debts less that £20,000, this is a similar alternative to bankruptcy. A DRO lasts for a year, after which time any outstanding debt is .
Alternative #: Credit Counselling Societies And Non
As you are not paying back the debt on the original terms and conditions, this will reflect as an R7 on credit rating for the length of time it takes you to pay off the debt + an additional 3 years so 8 years in total.
Many Canadians do not know that the non-profit society is actually financed by creditors. The debtor pays the credit counselling society and they pay the creditors.
The fees paid by the debtor are usually minimal but rarely do they offer less than 100% of debt repayment but can usually reduce the interest.
So are the credit counsellor societies a good option?
My personal experience is that you will likely pay much more back to your creditors . If I was in debt and based on what I know from working in this industry, this would not be my personal choice.
You can get free help from credit counsellors, though. However, I would not personally recommend this option to my family or friends in debt.
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Types Of Debts What Bankruptcy Wont Do For You
Theres a lot that people dont tell you about bankruptcy. Sure, it will get rid of most of your debts, but there are some debts you might still have to pay because they cant be included in your bankruptcy.
- Secured debts, like a car loan or mortgage
- Student loans, if they are less than 7 years old
- Child and alimony support payments that arent up to date
Also, if you recently racked up credit card bills and now want to go bankrupt, creditors may stop you or ask that you pay more, before they let you get rid of the debt through bankruptcy.
Providing Individuals With Workable Debt Relief Solutions
Searching for a lawyer for debt relief in Phoenix? At Oswalt Law Group, our firm is extensively experienced in a wide range of bankruptcy alternatives to help individuals, families and businesses regain control of their finances. We have produced highly favorable results for countless people in:
- Debt settlement
- Collections defense
We are extremely knowledgeable of the laws and procedures that pertain to all of the aforementioned processes and can provide you with the high level of guidance and advocacy you need and deserve. So many people are in a similar situation because of the real estate slump, loss of jobs or pay cuts, medical conditions, etc. This is why these solutions exist, so that you can get out of the trap that you are in and move forward with creating a brighter future.
Contact a Phoenix bankruptcy attorney to learn more about your debt resolution options.
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Negatives Of Declaring Bankruptcy
Bankruptcy will wipe out much of your debt, so many people simply declare bankruptcy without considering the alternatives in too much detail. But not all types of debt can be cleared.
In fact, in many cases the negatives of declaring bankruptcy outweigh the positives. This is yet another reason to speak to a professional before declaring bankruptcy, so you can look at the financial picture from all angles and make an informed decision.
Here are the negatives to consider before declaring bankruptcy:
- You need money to file for bankruptcy.
- Debt repayments are income-dependent .
- Not all debts can be cancelled .
- If youre a homeowner, you might lose your home. If you rent, a landlord might be able to kick you out of the property.
- Personal possessions and assets can be sold to repay debts.
- Your credit rating is negatively affected.
- Bankruptcy is declared publicly, and for many professions it can lead to dismissal .
- You could lose your business if you own one.
There are other negatives too, depending on your personal circumstances. Luckily, there are alternatives to bankruptcy which should always be considered first. Only ever use bankruptcy as a last resort, particularly if youre a professional or homeowner.
Bankruptcy Alternative: Consolidate Your Debts Into A Single Loan With A Low Interest Rate
You can approach a bank or credit union about combining, or consolidating, your debts into one loan. The bank or credit union issuing this new loan then pays off all your debts and, in return, you make a monthly payment to them. Make sure you shop aroundinterest rates vary. Be sure you close the accounts for the old debts so there is no chance you can use them again! Avoid further credit purchases, as this could make your debt load too great for you to handle.
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Before Declaring Personal Bankruptcy Check Out Your Other Options
In Canada personal bankruptcy is often something that people think they have to do when they are over their head in debt. However, before going down this path and declaring bankruptcy, it’s wise to get an objective opinion about your financial situation. A lot of Canadians don’t know that a number of alternatives to bankruptcy are available in all provinces. It’s always in your best interest to explore all your options and inform yourself. It is also important to find out what assets you may have to give up if you file for bankruptcy and how long it can take to rebuild your credit after the bankruptcy process is finished.
Contact A Professional Insolvency Practitioner
The most important message to take away from our guide is that the best solution to financial trouble isnt always going to be bankruptcy. There are other alternatives and they often provide a better and less destructive solution to your financial woes than bankruptcy.
You might not have been aware of the alternatives, because they are not so well known outside financial circles. The best first step you can take towards improving your financial situation is to talk to an insolvency practitioner.
Speak to an expert, discuss your problems, and work together to find the best solution for your personal circumstances.
Irwin Insolvency provides expert advice for business and individuals facing bankruptcy or insolvency. We have years of experience and a dedicated and empathetic team ready to help you through tough financial times. Contact Irwin Insolvency today for your free consultation.
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