Bankruptcy Filing Alternatives

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Alternatives to Bankruptcy Filing

Many see bankruptcy as the only solution to handle their crisis of debts. But an experienced bank attorney, Los Angeles (for those living in California) or an acclaimed law firm such as Recovery Law Group, who also operate in states of Nevada and Texas, will be able to easily access your condition and provide options to the debts problems of the consumers. Remember that paying off your debts in a regular way is the best way to clear off the dues.

Let’s explore a few options or alternatives to bankruptcy filing –

Debt Settlement

This is a process where negotiation arrangements are made with the creditor for taking a lump-sum payment that is generally lesser than the full amount due. The debt settlement solution is quite risky as the debtor needs to arrive at delinquency of debts so as to obtain the significant settlements. There is no assurance that the debts can be negotiated with the creditor and for how much. In addition, the creditor may even sue you before the negotiation settlement arrives between you and them.

The another effect of debt settlement is that they affect the taxes that will be paid. Let’s say that you owe $5000 on your credit card and the debt settlement no reduces it to $3000, then the remaining $2000 becomes a taxable income to you. This income needs to be reported in your taxable income and the tax needs to be paid on this value which may ultimately reduce your savings.

It is interesting to know from a 2005 report that Debt Settlements haven’t been a successful ordeal for the consumers. They generally encounter high-interest rates and additional fees from their creditors and they are pestered through collection calls further. The report is titled ‘An Investigation of Debt Settlement Companies: An Unsettling Business for Consumers’ and has been issued by National Consumer Law.

Credit Counselling

The second alternative Credit Counselling involves a reduction in payments that are negotiated with every creditor that the debtor is associated with. This counselling service is indicated on the credit report statements by the creditors. The statement on the credit reports can have effects on the credit rating of the debtor for a given situation.

The Credit Counselling is facilitated by counselling agencies who may seem to work your benefit but can eventually be working for the credit card issuers. Most counselling agencies are generally funded by the credit card issuers. They may continue to indicate that it is a time-consuming process but can eventually prolong your repayment to several years with the credit card issuer – the agency may only share a probable time of completion. The creditors may also agree to drop the interest rates and agree to the counselling plan but this process isn’t assured.

As a debtor, verify the effectiveness of the debt settlement or credit counselling agency and validate that they have a license. Also, evaluate if they accept payments from the creditors and if they are assuring a repayment plan, get the term of completion in writing. Getting some professional help in this area is suggested. Recovery Law Group works with their customers in California and Texas states and provide the best attorney, Los Angeles or Dallas regions to the consumers who need guidance on finding alternatives to a bankruptcy filing.