Today, even among sophisticated and educated consumers, there still exists a stigma against filing for bankruptcy. This stigma causes people to seek out alternatives to bankruptcy instead, all in an attempt to free themselves from their overwhelming debt burden. At Schwartz Bankruptcy Law Center, we believe that these alternatives are never as effective as filing for bankruptcy because they typically do not give you the fresh start you desire or need. Contact us today to learn more about how we can help you.
There are various positives and negatives associated with the various alternatives to bankruptcy, which can include the following:
While they are sold as preserving your credit, the reality is often something much different with debt settlement companies. Though the plans these types of companies sell to attempt to negotiate a lower debt with your creditors, the real outcomes of these negotiations typically further damage your credit and cause you to incur the extra cost of paying for services that didn’t achieve your goals.
There may also be negative tax ramifications through these plans that can be avoided by filing for bankruptcy instead. A Chapter 7 bankruptcy petition, for instance, can take care of your debts in a much more immediate and assured fashion than working with a debt settlement company.
A short sale can help you avoid foreclosure, just as Chapter 13 can. A short sale may occur when the fair market value of your home is less than the amount owed and must be approved by the bank.
The difficulty with short sales is that they often are not approved by banks. It can also take six months or more to receive an answer on whether or not approval is or isn’t going to be issued. Because most buyers simply do not have the time to wait that long, buyers typically avoid short sales.
A deed in lieu of foreclosure is a transfer of your rights to your home over to the bank. It is, essentially, turning in the keys and walking away from your home. The problem with a deed in lieu comes if the bank cannot sell the house for the amount you owe on it. In this case, you may be responsible for the balance still owed, unless the bank has agreed to waive that balance. This is called the deficiency balance.
Both Indiana and Kentucky allow banks to sue to collect these funds. Therefore, as part of this process, it is important that you get the bank to waive that deficiency balance. Otherwise, there is little or no benefit to the deed in lieu of foreclosure, unless you intend to file for bankruptcy at some point in the near future.
Taking the time on your own to negotiate with creditors and navigating the bureaucracy that comes with most banks is not likely to yield sufficient results for the amount of work you will put into it. You must then deal with the frustration of banks requesting extensive documentation, then potentially re-requesting them later on. Months may go by before a bank makes a decision. That time adds up, and all the while you’re held responsible for your debts.
Chapter 7 and Chapter 13 bankruptcy both allow you to take control of your debt now instead of waiting to see if modification of a loan is an option.
A lot of people attempt different methods to get out of debt. They may try one of the above methods or simply try to lead a frugal lifestyle in hopes they will eventually repay their debt. Sometimes this works, but not in all cases
The key to a real resolution of your debt situation is to take action now. Interest will continue to compound, creating ever larger principal amounts. Your creditors may secure wage garnishments, making your stress levels difficult to endure.
No matter what decision you make about handling your debt, talking to a bankruptcy attorney should be your first. A consultation with an experienced lawyer can make you fully aware of all of your options, whether it’s bankruptcy or a bankruptcy alternative. Contact us today so we can get working on your case.