When faced with huge financial problems, people often resort to filing for bankruptcy. Undoubtedly, it offers great respite for people, especially when it comes to harassing collection actions from the creditors. However, bankruptcy can negatively affect your credit report. According to Dallas based bankruptcy law firm Recovery Law Group, there a number of other viable options are also available for people struggling with debt. To know more about them you can call 888-297-6023 and speak with bankruptcy lawyers.
The alternate options depend largely on what your primary objective for filing bankruptcy is. If you wish to get respite from the harassing collection actions of creditors, you could opt for state and federal debt collection laws. Alternately, if you have some assets which you are willing to part with, you can negotiate with your creditors. Paying them some money from selling dispensable assets can buy you some time and goodwill from the creditors. You might even be able to settle your debts at less than what you owe. If, however, you are not so great with negotiations, you could seek help from non-profit debt or credit counseling agencies. You can find a state-wise list of the approved credit counseling agencies which are United States Trustee approved as completion of the course is mandatory for debtors prior to a bankruptcy filing.
Debt counseling
The credit counseling agency has a debt management program which is like the repayment plan in Chapter 13 bankruptcy Dallas. The advantage of choosing it over bankruptcy is that no record of debt management appears on the credit record. Having a bankruptcy on your credit record can affect your chances of getting a loan, credit cards, and even job prospects. However, opting for the program has some demerits too:
- The automatic stay in bankruptcy protects collection actions, even if you miss a payment. There is no such provision in the debt management program.
- You are required to pay your debts in full in case of debt management while you can pay a fraction of your unsecured debts during Chapter 13 and the remaining debts get discharged at the end of your repayment plan.
- Many debt management and settlement companies are in the business of collecting fees for their services and may cause you more harm than benefit.
- There have been instances of scams reported, where such companies receive funds from creditors and there might exist a conflict of interest in such cases.
If you are “judgment proof” i.e. have little income and property, you can continue to remain in debt without filing for bankruptcy or seeking any other recourse. Since you have limited property and meager income, any creditor trying to collect from you will be able to get nothing. Unless you draw attention to yourself by refusing to pay government taxes, or spousal or child support, you cannot be thrown in prison for your inability to pay your debts. Moreover, essentials like clothing, personal effects, household furnishings, food or social security, public assistance or unemployment benefits cannot be taken by the creditor.