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Alternatives to Bankruptcy – Debt Settlement, Debt Consolidation and Credit Counseling Agencies

Posted by Madeline M. McIntosh | Jun 23, 2020 | 0 Comments

Are you concerned that you're going to have to file bankruptcy? Did you know you may have other alternatives to bankruptcy? There are several alternatives to filing bankruptcy, and one of these discussed below may just be your answer.

We'll start with Debt Settlement. The FTC has called out Settlement Companies in the past, and they do have their risks. From a marketing standpoint these companies promise great things for the debtor and end up giving very little in return. You can try to negotiate by yourself if you have enough funds on hand to settle. This approach will definitely save you time and money.

Debt Settlement is a rather dicey venture because you are withholding payments from creditors. Then when your account is very overdue and delinquent, and sometimes already in Collections, the attempt is made to get the creditor to agree on smaller payments to pay off the debt.

But what about your credit score during all this delinquency and non-payment of debt? It lowers your score and once the score has suffered a direct hit, there's no guarantee the creditor will negotiate with you. 

I will say that when I managed my mother's health care office, we had a case just like this. I sent invoice after invoice, and this person had a lot of old debt. The client called one afternoon, exasperated, and said that there was a bankruptcy in the works, and would we accept half of the bill paid. Of course, we said yes, and it was better than getting no payment. This person was always welcome back to the office. Though the client knew payment had to be made in visits going forward.

Next is Debt Consolidation. Just as the term implies, you are consolidating or combining your debts into one payment at a lower interest rate. You save money and your credit score. You can choose to transfer the balance on your card to a lower rate, and if you qualify for a 0% interest rate it would be best. A debt consolidation loan will have a lower rate than your credit card's interest rate. If you don't mind putting your home at risk, you can opt for a Home Equity loan. Remember though, if you miss a payment, you're likely to have your home subject to possession by the lender.

Most creditors, when bankruptcy is a debtor's only option, will usually give the approval to lower the monthly payment, design a longer termed repayment plan, or even reduce the interest rate. This would be the preferred action of the creditor due to Chapter 7 discharge of debts and a repayment plan in Chapter 13.

This is a much better option for the creditor, especially if its interests are not priority to other creditors, than if the debtor has the debt discharged in Chapter 7 bankruptcy or placed in a court-approved repayment plan in a Chapter 13 bankruptcy.

If calling creditors and trying to negotiate a lower payment is not your thing, then there is a final option for you. Credit-Counseling agencies, for a fee, will work for you to create a debt management plan.

Right here let me provide the List of Credit Counseling Agencies Approved pursuant to 11 USC Sec. 111. Use the drop-down menu to locate your state and district. For example, Dallas, Texas is in the Northern District and your search for US Trustee approved Credit Counseling Agencies should be chosen from there. These are approved Credit Counseling Agencies. Even if you file bankruptcy, you will still have to meet with one of these companies 180 days before your file bankruptcy.

Credit Counseling is a means to offer a debt plan for those struggling with their monthly payments. These companies look at your individual situation to help negotiate with creditors to get you a lower interest rate or a lower monthly payment.

 This blog is intended for information purposes only and does not establish legal representation or financial guidance. 

About the Author

Madeline M. McIntosh

Law Office of Madeline M. McIntosh

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If you have any questions about any aspect of your disability claim, a denial or filing Bankruptcy, contact the Law Firm of Madeline M. McIntosh today at 469-678-7274 or [email protected].

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