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Alternatives to Filing Bankruptcy

There is just no easy way to get out of debt, you have to face up to the consequences. A bankruptcy is not always the answer, as the effects are long lasting. There are four ways to handle debts that are out of control, listed in best to worst in regards to the effect it will have on your credit:

  • If your credit isn't in terrible shape, can you reduce your other expenses, even if it means making hard choices or just change your lifestyle to fit your income? Some ways to do this:
    • Selling the second car
    • Pulling equity out of your home
    • Applying for a non secured signature loan
    • Obtaining a loan from a relative
    • Selling your home and paying off your debts with the proceeds and then renting
    • Cashing out your 401K/retirement benefits
    • Selling family heirlooms, jewelry, etc
  • If your credit is already gone or one of the above isn't an option, go through Consumer Credit Counseling Services (CCCS). Check your yellow pages for the local number. In this way you're paying off your debts as if you were in a Chapter 13 bankruptcy, but you don't file a bankruptcy.
  • If CCCS won't take you, you may want to consider bankruptcy. Filing a Chapter 13 takes longer, but your credit is in a little better standing than if you file a Chapter 7. In Chapter 13 you are given up to 5 years to pay off your debts. The disadvantage is that you're in bankruptcy for up to 5 years plus your credit report shows your bankruptcy for 7 more years after you have finished paying off your debts.
  • If you are so far in debt that you can never repay it, then the best solution may be a Chapter 7 bankruptcy. Chapter 7 is the least desirable credit wise, but you are typically out of bankruptcy in 6 months and you don't have to repay any debt. The disadvantage is that this shows on your credit report for 10 years from the date of filing your bankruptcy, and creditors are starting to tighten their credit requirements, and you may have a tough time getting future financing.

There is no magic solution. Don't believe anyone who tells you otherwise.

Disclaimer:
This information deals with Chapter 7 consumer bankruptcy. Each state has its own bankruptcy laws, so you need to check with your state for details. Information dealing with Chapter 13 bankruptcy and consumer debt restructuring is not discussed in the above FAQs. The information contained in the following FAQs is provided for general information purposes only and is not intended to be a legal opinion nor legal advice nor is it intended to be a complete discussion of all the issues related to the area of Chapter 7 consumer bankruptcy. Every individual's factual situation is different and you should seek independent legal advice regarding specific information.



PRMI NMLS No. 3094. Branch NMLS 252910. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification. This office is licensed and examined by the Office of Consumer Credit Commissioner of the State of Texas. Alabama Banking Department Bureau of Banking MC 20316. Arkansas Securities Department 11558. Florida Office of Financial Regulation MLD646. Department of Banking and Finance 6521. Office of Financial Institutions #771. Missouri Division of Finance. Mississippi Department of Banking and Consumer Finance, 3094. Oklahoma Department of Consumer Credit ML010027. Department of Financial Institutions 109282.

PRMI NMLS No. 3094. Branch NMLS 252910. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification. This office is licensed and examined by the Office of Consumer Credit Commissioner of the State of Texas. Alabama Banking Department Bureau of Banking MC 20316. Arkansas Securities Department 11558. Florida Office of Financial Regulation MLD646. Department of Banking and Finance 6521. Office of Financial Institutions #771. Missouri Division of Finance. Mississippi Department of Banking and Consumer Finance, 3094. Oklahoma Department of Consumer Credit ML010027. Department of Financial Institutions 109282.