Pardon my bluntness, but the alternatives to bankruptcy often just suck.
I’ve heard countless horror stories about alternatives to bankruptcy over the course of my career but the one that has stuck with me was one that happened about two years ago.
A client hired a debt settlement company thinking they’d get her out of a big mess she’s gotten into. She didn’t want to file bankruptcy because she was worried about the “stigma.” Because she was worried about the “stigma” she ended up with 5 different judgments against her and three separate garnishments. The cost of her bankruptcy was higher than it otherwise would have been and she’s still out the $2,000 she paid to the debt settlement company. (For the record, my fee in her case would have been less than that amount.).
Living Large on Fear
Stories like this one exist all over the country. People get ripped off every day because they’re scared of bankruptcy. Alternatives to bankruptcy are blasted all over the internet and TV. They are a shining example of the way these firms profit from the fears of people who think bankruptcy makes them a bad person or will, “cost them everything.” Most people will do just about anything they can think of in order to avoid bankruptcy for one reason or another. Maybe they’re ignorant of the process of bankruptcy or they have some moral obligation they need to fulfill by paying their debts.
If you’re one of those “debt relief” companies, feeding the fear of bankruptcy will make you very rich.
Appeal to the inherent desire to do right by creditors, and you get your money before it’s obvious the debt is simply too large to pay off.
When can Bankruptcy be the Best Choice?
I’ll be very honest, Bankruptcy isn’t for everyone. In terms of my finances, that isn’t the best thing I can say, but that’s not why I’m here. Bankruptcy can vastly improve the lives of many more people than actually use it. I have several instances when bankruptcy is a good idea. Generally speaking, the following statements apply:
- The greater your debt to income ratio, the more it would benefit you to file bankruptcy.
- If you don’t have a substantial amount of money saved up for retirement, you should probably consider filing.
- If you’re older, you should look at filing.
ALWAYS do your Homework
Even though I’m married to a teacher, I don’t claim to be one myself. I can, however, tell you this. If you’re going to pay money to someone who is PROMISING to get you out of debt, you should at least meet with a bankruptcy attorney. Our firm offers free, no obligation consultations. A lawyer can tell you about how bankruptcy should work and the risks that come with working with a debt settlement firm.
Unlike debt settlement, a bankruptcy can usually wipe out debts, often with no payments necessary so you can obtain immediate relief without the chances that the creditor will send you a 1099-C.
Other people with higher incomes or significant assets that can’t be protected in a Chapter 7 Bankruptcy can often file a Chapter 13 case. Chapter 13s are known as debt reorganization cases. Depending on your circumstances, you’ll pay back anywhere from 1% to 100% of your unsecured debt.
The bottom line is, there are alternatives to bankruptcy, but a lot of them stink. If you truly want to be debt free in the fastest, most pain free way, bankruptcy is the way to go. However, you should always decide the course that’s best for you. Meeting with one of our attorneys is free of charge and we can tell you the best course of action. In the end, we want to help you any way we can, even if it’s to tell you that bankruptcy isn’t the best option for you. If you feel you’ve reached the end of your financial chain, don’t wait until it’s too late. Contact us today for a free, no obligation consultation.