Weighing the Pros and Cons of Different Bankruptcy Alternatives

 Posted on November 03, 2022 in Bankruptcy

If you are experiencing financial hardship, you may be wondering if bankruptcy is right for you. However, bankruptcy can often seem like a drastic step, and you may be unsure about how it will affect your credit and other aspects of your life. There are some other ways to address the debts you owe, and you may be considering various alternatives to bankruptcy. However, you will need to understand the benefits and drawbacks of these different methods, and by consulting with a bankruptcy lawyer, you can determine the best options that will work for you.

Alternatives to Bankruptcy

Some non-bankruptcy options that you may be considering include: 

• Debt management plans - Credit counseling agencies offer services to help debtors set up payment plans, and they may be able to negotiate interest rates and reduced monthly payments. This can be an option for those who will be able to make ongoing payments toward their debts. However, if you are struggling financially and unable to make payments, this may not be a good solution.

• Debt consolidation - Rather than making multiple payments toward different debts, you may be able to consolidate debts into a single loan. This may be done by transferring balances to a credit card or taking out a debt consolidation loan. While this may help simplify your monthly payments, it will not reduce your overall amount of debt, and you may still struggle to make ongoing payments. Due to high interest rates on credit cards or debt consolidation loans, you may end up paying much more than what you originally owed. To make matters worse, if you default on a debt consolidation loan, this could result in the loss of assets used to secure the loan, such as your house.

• Debt settlement - You may be able to negotiate with creditors to settle your debt for less than what you owe. This can help reduce your overall debt amount and make payments more affordable. However, your credit score could be negatively affected, and you may also be required to pay taxes on the amount that was forgiven. If you are already behind on payments and are struggling to meet your obligations, this may not be a workable solution. 

• Loan modifications - This option involves negotiating with creditors or lenders to modify the terms of a loan, such as extending the payment period or reducing interest rates. This can make payments more manageable, but it may not reduce your overall debt, and more time may be required to pay off what you own. Since you will still be required to make ongoing payments, this may not be an option if you are struggling financially. 

Contact Our San Antonio Bankruptcy and Debt Relief Lawyer

While the options above may help you reduce some of the burdens you are facing due to your debts, they may not be workable long-term solutions. If you have encountered financial difficulties that have made it difficult or impossible to repay what you owe, bankruptcy may ultimately be the ideal solution, and by eliminating your debts, you will be able to regain financial security and maintain ongoing success. At the Law Offices of Chance M. McGhee, we can advise you on the best ways to deal with different types of debts, and we will work closely with you to make sure you can complete the bankruptcy process successfully. Contact our Schertz, TX bankruptcy attorney at 210-342-3400 to arrange a free consultation today.

Sources:

https://ccadvising.com/articles/bankruptcy-alternatives-and-their-success-rates

https://www.greenpath.com/bankruptcy-alternatives/

https://money.usnews.com/money/blogs/my-money/2012/05/16/5-ways-to-avoid-filing-for-bankruptcy