subject: What If I'm Not Ready to File for Bankruptcy? Are There Other Options? [print this page] What If I'm Not Ready to File for Bankruptcy? Are There Other Options?
As a bankruptcy attorney I many times will meet with people who are confused about their debt relief solutions. There are plenty of times when people come into my office and are still considering other options like credit counseling or debt settlement programs.People need to realize that bankruptcy does not carry the stigma that it used to. The fact is that bankruptcy is a federal law that gives debtors legal relief from their burden. They're usually surprised to hear this when faced with a credit counseling service, working with a debt settlement program, or bankruptcy.Let's look how these two services work:Credit Counseling:Credit counseling services might seem to be a simple solution, however: you just sign up with them and they'll negotiate a lower monthly payment, right? Wrong. Working with credit counseling might actually get you a smaller monthly payment, however absolutely nothing is done about the interest, which will continue to grow on your account. There have been so many times that I've helped clients who were previously working with services like this, and so many times their debt actually increased because those services do nothing to take care of interest. Making payments that were too low to start lowring the balance anyway.Debt settlement programs:Debt settlement programs will claim they can settle your debt for pennies on the dollar. This isn't quite a liebut they forget to mention exactly how many "pennies." These debt settlement programs will usually give you an estimate (about 40% of your total debt), then put you on a payment plan for that amount. You might be wondering: What's the catch? For one, until you've paid a certain amount they won't even contact your creditors. This means that your creditors can still come after you while you're paying the debt settlement programs' fees and making monthly payments!Bankruptcy:Bankruptcy is a legal tool in place to help people control their debt. Over the years it's evolved quite a bit. When you work with a bankruptcy attorney you can often get rid of garnishments and credit card debt.How though, is it different from the other options? First, you won't have to keep paying rapidly increasing interest rates. Furthermore, bankruptcy is not a service but rather a legal process. Because it is a legal process your creditors HAVE to acknowledge it. If you work with a debt settlement program or a credit counselor your creditors can pick and choose whether or not they want to work with you. Say for example, your debt settlement program tries to settle with your creditors on your wage garnishments. The creditors don't even have to consider the offer. Your creditors accepting something like that is extremely unlikely. Why would they when they are already getting the money they want (plus interest)?Bankruptcy, unlike these services, forces your creditors to stop garnishments when you file your case. You can even recover the wages they garnished in most cases.
