Alternatives to Bankruptcy

Alternatives to Bankruptcy

In some cases, bankruptcy may not be the best solution for you. You might have to risk non-exempt assets, your debts may be non-dischargeable, or you may not be eligible to file.

You might want to take other steps first. You could try to sell your valuable assets (like jewelry, cars, or watches) to pay off debts. Alternatively, you may want to ask your family if they are willing to help you. Of course, many people prefer not to involve family, especially if you can qualify for bankruptcy.

It's not a good idea to transfer credit card debt to a lower interest credit card: this will solve your problems temporarily at best. Credit card companies will fight to collect their money if you file for bankruptcy after transferring large debts to a new card.

You could refinance your home if you own equity in it, or you may be able to get a home-equity line of credit. If you choose this route, make absolutely certain you can afford the payments; if you can't, you may lose your home entirely. Consider carefully before you try to pull equity out of your house to pay creditors.

Tapping into your retirement plan is usually a bad idea. Pension plans are generally safe from bankruptcy, and you may be able to protect your pension or retirement money. However, if you borrow against your pension or retirement investments, your creditors can seize those funds during bankruptcy and you will incur tax penalties for a so-called "early distribution."

 
  • Introduction to Bankruptcy
    Do you need a fresh financial start? Are you being hounded by debt collectors? You are not alone. Almost 1.5 million individuals file personal bankruptcies every year in the U.S. It has been a long-standing element of American law that an individual can file for bankruptcy and obtain a fresh start...
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  • Types of Bankruptcy
    For individuals, there are two basic types of bankruptcies : chapter 7 and chapter 13. An individual may file for bankruptcy under Chapter 7, which is sometimes called "fresh start" or a "liquidation" bankruptcy. In a Chapter 7 bankruptcy, an individual may keep certain kinds of property (called "...
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  • Who Can File?
    Generally, anyone can file for bankruptcy. However, not everyone qualifies to file for a particular kind of bankruptcy. If you are an honest person who can't afford to pay your bills, you can qualify for bankruptcy. If you have previously filed for bankruptcy, it may affect your options. For...
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  • The Process
    There are eight common elements in obtaining a bankruptcy discharge (i.e., eliminating or reducing your debts, or planning their repayment), although the details of these may vary depending on your situation. The attorney you find through LegalZoom will help you with the entire process which takes...
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  • Pre-Bankruptcy Credit Counseling
    Before you can file for bankruptcy, you must first consult a nonprofit credit counseling agency approved by the United States Trustee's Office. This consultation may show you if there are alternatives bankruptcy that would work for you.
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  • Bankruptcy Reform
    Congress changed the bankruptcy laws significantly in 2005, making it more difficult for individuals to file for bankruptcy. However, bankruptcy relief remains available to those who qualify. Some important elements to the revised bankruptcy laws are:
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