Bankruptcy Pre Discharge Course
There are many bankruptcy options for debtor education that you should explore before you consider filing for bankruptcy. While bankruptcy can help protect some of your assets from creditors, it can also hurt your credit standing and prevent you from being able to borrow money at reasonable rates in the future. Your bankruptcy filing will appear on your credit report for the next ten years. Here are some alternatives you can pursue before you take the serious step of filing bankruptcy.
Negotiate a repayment plan with your creditors.
If you approach your creditors and are honest with them about your financial situation, they may be open to negotiating a repayment plan with you since it is more beneficial to them than if you filed for bankruptcy. In particular, creditors who hold unsecured debt may be more willing to negotiate since there are no assets they can confiscate to recover their money. Most of these creditors will be willing to settle for as little as pennies on the dollar or some 50% or less of the total debt. You can make an offer to settle the debt with a lump sum payment or through a series of installment payments. If you make a lump sum offer, you should already have the cash on hand. If you can transfer funds at once, the creditor may be more willing to settle quickly and for a lower amount.
Ask a credit counseling company for help
It can be difficult for debtors to negotiate with their creditors since these companies will do everything they can to intimidate them. Working with a credit counseling company can not only help to make the process of negotiating for a reduced debt easier for you but also ensure that your rights are protected. If you are interested in working with a non-profit credit counseling agency, you can visit the US Trustee website and look for a Trustee-approved list of agencies in the Credit Counseling and Debtor Education page.
Budget your money
If you think you have sufficient self-discipline, you can sit down and determine how much you need to spend in a month to pay off your debts, and then find ways to cut back on your expenses in order to be able to make your payments. This can involve changing your spending habits such as eating out less, not buying coffee from your favorite coffee shop, and eliminating your subscriptions to cable TV services. Alternately, you can sell some of your possessions to raise more money for debt repayment or find other ways to earn more money such as taking on a second job or accepting odd jobs such as babysitting or pet walking.
Take no action
If the reason you’re facing bankruptcy is because your financial situation is so bad that you are practically living hand to mouth, then the best course of action may simply be to do nothing, since you have few assets your creditors can confiscate. In addition, except under extraordinary conditions, you cannot be sent to jail for not paying your debt nor can your creditors seize your essential possessions such as your Social Security or unemployment payments and your personal effects.
File for chapter 13 bankruptcy
If you really have to file for bankruptcy, this is one of the best bankruptcy options to pursue. Under a Chapter 13 filing, you will still need to create a repayment plan but you are protected against collection actions filed by your creditors in case you miss a payment. And you will ultimately end up paying only a fraction of your unsecured debts. The Chapter 13 filing also appears on your credit report for only seven years, starting from the filing date, as opposed to a Chapter 7, which stays on your report for ten years.