Yes, there are many alternatives to filing bankruptcy, but there are always negatives and positives in trying to find an alternative solution to your financial problems and issues. Below is a list of pursuing possible alternatives and whether or not you need to consider the consequences of using these alternatives versus the bankruptcy filing.
Alternatives to Bankruptcy Filing:
- Restructuring your home mortgage loan(s).
- Taking out a home equity loan to pay debts such as credit card liabilities.
- Using funds from retirement accounts or borrowing against pension plans to lower your outstanding debts.
- Obtaining loans from relatives or friends.
- Taking a second or third job to increase your income.
- Renegotiation with creditors to reduce or extend the term on debts.
- Sell assets to pay down or fully pay debts.
- Do nothing and deal with the consequences of debt collectors and poor future credit ratings.
Because bankruptcy law is so complex, you would be well served to consult with an experienced bankruptcy lawyer to help you understand the consequences of taking any of these alternative routes. If you decide not to file for bankruptcy, an experienced bankruptcy attorney will help you understand the consequences of various kinds of debt that you may have.
In the event of default, the lender can repossess your vehicle and sell it to cover your outstanding car loan. Many times the sale proceeds are not enough to cover the debt, so you lose the car but still have the remaining deficiency balance that you owe. You may return the vehicle to the lender, but it will still negatively affect your credit. You may decide to try to sell the car yourself because you believe you can get more money for it in order to pay off the outstanding loan. Selling your own car generally results in more money for the car than to allow repossession by the lender.
A mortgage lender cannot simply throw you out of your home when you make a late payment. The lender must first go through the foreclosure process to legally reclaim the home. In almost all cases, it will take a minimum of three to four months, and usually much more time than that to foreclose. You can live in the home until the foreclosure is completed. In many cases, you can negotiate with the lender some kind of alternative or modification to the original loan.
Alimony and Child Support
Because these support obligations are not usually dischargeable in bankruptcy, you need to thoroughly examine the effects that bankruptcy will or will not have on your financial future. This is an extremely sticky area that will vary widely, depending on children, custody, your income, previous obligations made under a divorce settlement, and possibly many other factors.
Have you filed all the appropriate tax returns with all the appropriate taxing authorities? If not, it is extremely important to file those tax returns and to find out what your tax obligations are, possible penalties, and interest that you owe, before filing for bankruptcy. Some taxes may be dischargeable or reduced through offers in compromise and other forms of negotiation with the tax collector. More importantly, most net operating losses (“NOL”) disappear after filing for bankruptcy to the extent of discharged indebtedness resulting from bankruptcy.
This is another case where past obligations will not just disappear with the passage of time.
Fines, Fraud and Restitution
Many obligations that are predicated on fraud or arise from fines and restitution orders, generally do not go away in the bankruptcy, and are best to be negotiated with the appropriate litigants or governmental agencies.
Passage of Time
Most debts will eventually expire under a statute of limitations. In many cases, after six years, you may no longer have to pay the debt if the creditor does not sue you within that time period. Unfortunately, if you are sued and a creditor wins, i.e. obtains a judgment against you, some judgments can last as long as 20 years. The real problem here is to figure out when the statute of limitations starts on each kind of debt. Can you deal with debt collectors for years in the future?
This may seem like a lot of information but it is designed to protect you. Give us a call at (775) 786-7600 or (775) 690-9120 for a free and confidential consultation to discuss your financial situation, alternatives to bankruptcy and the many details of filing for bankruptcy whether it be chapter 7, chapter 11 or chapter 13.