Finding a Bankruptcy Alternative Tips

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I have some money in my 401(k), can I use that to pay my outstanding debt.

Consider All Sources Before Filing Bankruptcy

Many financial planners and so called experts would argue that you should never touch your 401(k) save for an emergency. If you are knocking on bankruptcy's door, this is an emergency. The money that you are contributing to your 401(k) is not going to do you any good if you end up filing for bankruptcy. If you have those funds available, and it means avoiding bankruptcy, its time to activate that safety net.

Most 401(k) companies offer hardship withdrawals to its participants who have fallen on hard times. In some cases you may have to provide them a written reason for your withdrawal. You have to be able to demonstrate an immediate and heavy financial need. Your withdrawal may be subject to state and local taxes, as well as the 10% early withdrawal penalty if you are under age 59 ½. As with anything else concerning taxes, consult your tax advisor as to how this will affect you. If you find that relying on your 401(k) is your only alternative, start the conversations early with your investment company. These companies want to see you get back on your feet, and they will do everything that they can to help you. However, they may not be able to help you as much if you do not give them sufficient time to put a game plan together for you.

How can I find a reputable credit counselor?

Research a Credit Counselor

When you are staring at a mountain of debt, you may become completely overwhelmed by the phone calls, and all of the collection letters that you are receiving in the mail. Couple all of this with your other obligations, you may not see any other alternative other than bankruptcy. Before it gets to that point, you may want to consider a credit counselor.

The best way to find a reputable credit counselor is to contact the National Foundation for Credit Counseling. They can be reached at 1-800-388-2227, or online at A reputable debt counseling organization will negotiate with your creditor on your behalf to accept a lower payment, and in some cases lower your interest rates. Once this is done, your debt counseling company will work with you to identify a payment plan that fits your budget that you agree to pay on a monthly basis. These organizations typically charge a low monthly fee ranging from $25-$39 per month. Be cautious of those charging extremely high fees. As you shop for a credit counseling program, choose one that is right for you.

How can avoid Baknruptcy

If You Can't Afford to Pay Cash, You Can't Afford It

Life happens, so there may be situations where you may find yourself in a tough financial predicament. The best way to avoid bankruptcy is just by being disciplined, and practicing good money management and fiscal responsibility. If you can't afford to pay cash for it, you can't afford it.

Avoid high risk and speculative investments. The, and real estate booms and eventual busts are responsible for contributing to the increase in bankruptcies. If you ever find yourself falling behind on your bills, call your creditors immediately! In most cases creditors want to assist and work with you to get caught up on your bills. You may be able to work out a temporary payment plan that allows you to reduce your payments. Remember that bankruptcy is not a walk in the park. Your financial situation does not automatically disappear. Explore all options before going down this path. Consider cutting back on all unnecessary expenditures. You may even have to sell some of your assets or apply for a hardship loan from your 401(k)

What is Chapter 7?

You May Lose Your Assets

Those who file for Chapter 7 bankruptcy typically have large credit card or unsecured debt, and very little in the way of assets. If you own your home or car, there is a chance that you may lose them, so your lawyer may suggest filing for chapter 13. When you file for Chapter 7, most of your personal property is turned over to a court appointed trustee who sells your property, and uses the proceeds to cure your debts. You are allowed to keep some exempt property. However to keep property you are financing, such as your car, house, or furniture, you must sign a Reaffirmation Statement stating that you will be responsible for those debts. Once the Reaffirmation Statement is signed and approved, you cannot change your mind in a couple of years and decide that you do not want to be responsible for paying for those assets. This is considered discharging. Debts cannot be discharged for six years.

What is Bankruptcy?

Bankruptcy Should Be Your Absolute Last Resort

Bankruptcy is a federal court process that places you under the protection of the bankruptcy court while you try to repay your debt or have your debt removed altogether. Once you file for bankruptcy, a automatic stay goes into effect. An automatic stay prohibits creditors from attempting to collect the debt that you owe without court approval. This is also the case when a bank is in the process of foreclosing on your house. Bankruptcy should be your absolute last resort. The ramifications of filing for bankruptcy are far reaching. Although filing for bankruptcy does not have the negative stigma it once did, it should not be taken lightly. Consulting a good bankruptcy attorney is critical when entering this decision. A bankruptcy attorney will take a look at al of your debts, financial obligations, and sources of income to determine what options you have. Remember that this is a big decision that could affect you well into the future. So carefully consider all of your alternatives. A bankruptcy can remain on your credit report for up to ten years.

What is Good Debt?

The Right Mix of Debt

Before hitting the brink of bankruptcy, it is important to get real with yourself, and understand what kind of debts you have. Unfortunately, the amount of personal debt in this country is ever growing, and that is due in large part to the ease in which credit can be obtained. Debt is the ugly side of the credit coin. There is no secret to understanding your spending habits. If you can pay cash for something, in most cases you can afford it. If you find yourself always reaching for plastic, chances are you can't afford it.

When you make purchases on a credit card for items that you know that you would not ordinarily be able to afford, that is an example of bad debt. Putting that flat screen T.V. on your store card, is also an example of bad debt. Essentially if you are borrowing to pay for your lifestyle, that is bad debt.

So what is good debt? Good debt is an investment that at the end of the day will create value. For example, student loans are considered good debt. Some of you may argue otherwise, but a student loan is an investment in your education. As a result of your college education, you earned a degree that would lead you to a better paying job or profession. Another example of good debt is the purchase of your home as a primary residence. This is a good investment, because homes typically appreciate over time. Unfortunately many people were swept up in the housing boom of a couple of years ago, and purchased homes as investments. Purchasing a home as an investment tool, is almost as bad as having bad debt. So its important to be able to draw a distinction between what is considered good debt, and what is considered bad debt.

How can I find an alternative to filing bankruptcy?

Finding an Alternative to Filing Bankruptcy

Nothing can hurt your future credit worthiness like a bankruptcy filing. You could miss an entire year's worth of monthly credit card payments and you still wouldn't do half of the damage of a bankruptcy filing. Due to the seriousness of this action, you should seek out an alternative to filing bankruptcy until you find one that suits you. Here are some places to start.

First, why are you thinking of filing? If it is because of unmanageable debt, you can speak with a debt and credit counselor about how to get your finances back under control. The main alternative to filing bankruptcy is to keep your finances under control and these people can give you the roadmap to success.

Another place to find alternatives to filing bankruptcy is the Internet. As you have found this piece of information, there are thousands more that come from banks and lawyers who want to show you these alternatives. Take the time to find out what these places can offer you in terms of a plan to avoid filing for bankruptcy. Finding an alternative to filing bankruptcy is as easy or as hard as you make it.

If you choose to go it alone, it will be very difficult. If you are smart, you will enlist the help of professionals who know how this system works and can get you back on track without the need to take the ultimate penalty.

Is an out-of-court settlement a reasonable bankruptcy alternative?

Out-of-Court Settlements as a Bankruptcy Alternative

There are many alternatives available to those thinking of choosing bankruptcy to get rid of their debtors. One of the most popular alternatives for people who are in this situation is an out-of-court settlement. Here is a quick explanation of how an out-of-court settlement works as a bankruptcy alternative.

Instead of filing for bankruptcy, you can try to settle your debt at a reduced amount with an out-of-court action. This is a tough situation to deal with on your own, but there are independent companies that can help you negotiate with your creditors. Of primary importance is that these negotiations are handled properly. Because of the delicate nature of this process, you should opt for professional assistance with this bankruptcy alternative.

Improper negotiation in an out-of-court settlement can hurt your credit if not performed correctly. Speak with a specialist who can handle this type of bankruptcy alternative before you attempt it on your own. Help is out there, it is just up to you to take advantage of it.

Should I get an attorney to assist in filing bankruptcy?

Filing Bankruptcy with the Help of an Attorney

Unfortunately, many people are left with no other solution to their debt problems besides filing bankruptcy. If you happen to be in this situation, you should consult with and retain an attorney to ensure that the filing is done correctly. Filing for bankruptcy is a last resort solution and can have long-lasting negative effects on your credit. If done incorrectly, those effects will only be worse. A bankruptcy attorney has the experience and knowledge that you need to get your filing submitted correctly. This expertise comes at a cost, but for the average person who has little idea how to go about filing bankruptcy, these fees are necessary.

Nobody should go blindly into bankruptcy and a good attorney will help keep your eyes open. Filing bankruptcy does not have to mean the end of your financial future. In fact, if done correctly, it should be a whole new start. To find a bankruptcy attorney in your area, contact your state Bar Association for references. Every state Bar registers the attorneys that work in their state.

You should always choose a bankruptcy attorney that is Bar accredited and has great references. Bankruptcy filings are public record, so you can easily track recent bankruptcy filings to see attorneys that are local to you. Check your newspaper for these. Remember, filing bankruptcy is a last resort and should always be handled with the help of a professional. This process is supposed to give you a new start, so don't fall further behind by neglecting to get the help you need.

What should I know when choosing a bankruptcy alternative?

3 Questions to Answer when Choosing a Bankruptcy Alternative

If you are thinking about filing for bankruptcy and want to know about which alternatives may be right for your scenario, here are a few tips on how to make the best decision.

  1. Have you consulted with a professional? A bankruptcy alternative rarely will come to you in a dream. There are professionals who are trained and have the experience necessary to show you a range of alternatives from which you can avoid bankruptcy. Do not file until you have spent time with these pros. They could spare you the whole experience
  2. How will it affect your long term future? When you are evaluating each bankruptcy alternative, you need to take a close look at how it will affect your future. A bankruptcy can destroy your credit report for up to 7 years. Almost every bankruptcy alternative will do some damage to your credit, but how much and for how long depends on which you choose.
  3. Have you seen it all? Many are so scared of filing for bankruptcy that they will accept the first bankruptcy alternative that comes before them. Too often this leads to erroneous decisions that have even worse effects than the filing would have.

Make sure that you have gotten a look at all of your options before you choose your bankruptcy alternative. This may involve speaking with several professional for first, second, and third opinions. I guarantee that it will take less than the 7 years that a bankruptcy will stay on your credit report. To me, this makes it worth it.

What information do I need to gather to file bankruptcy?

The Information You will need to File Bankruptcy

If you are soon to file bankruptcy, it is important to get all of your proverbial ducks in a row. Here is a quick checklist of the information you will need to provide when you file bankruptcy.

  • Name and address of creditors, collection agencies, or attorneys, if any.
  • A basis for claims and account numbers of debts.
  • Dates when the debt was incurred.
  • Total amount of bankruptcy claim.
  • Co-debtor's name and address, if applicable.
  • Your name, address, phone number, social security number, and date of birth.
  • Your spouse's name, address, phone number, social security number, and date of birth.
  • Any bankruptcies within the last six years, when they were filed, case number and date filed.
  • Income from employment or business for both you and spouse.
  • Payments to creditors
  • Suits, garnishments, executions and attachments (if any).
  • Repossessions, Foreclosures and returns within one year immediately preceding this bankruptcy. (if any)
  • Assignments and receiverships made within one year of the filing of this bankruptcy.
  • Gifts over $200.00 to family members and over $100.00 to charities.
  • Losses from fire, theft or other casualty including gambling.
  • Payments related to debt counseling or bankruptcy within one year prior to filing.
  • Closed financial accounts within the last year.
  • Safe deposit boxes, where they are located, persons with access, contents and surrender date.
  • Property owned by another person that you hold or control.
  • If you have moved within the past two years, list all previous addresses and dates.
  • Monthly budget of all expenses.
  • List of all property (i.e. real estate, bank accounts, cash on hand, furnishings, personal effects and so on.) owned by both spouses.

Gathering all of this information can be tedious, but it is necessary to file bankruptcy. Be sure you have all of this at your disposal before starting the proceedings. Improper procedure leads to further damage to your financial future.

Is debt consolidation a reasonable personal bankruptcy alternative?

Debt Consolidation as a Personal Bankruptcy Alternative

Many people choose to file bankruptcy because they feel that they owe too much money to too many people. This alone should never be the reason for filing for bankruptcy. With the low interest rates on the market today, debt consolidation has become a great personal bankruptcy alternative. Here is a quick breakdown of how consolidation may help you avoid filing for bankruptcy.

Most in this situation have had problems making payments to their current creditors. This is understandable for someone who has to meet several monthly payments at differing interest rates. However, if you choose consolidation as a personal bankruptcy alternative, you can move those several payments into a single, more manageable payment. It is far easier to manage your money when you know exactly what your one payment will be each month.

There are many lenders who are specializing in debt consolidation as a personal bankruptcy alternative. When you file for bankruptcy, everyone loses, in a sense. When lenders help you consolidate, your creditors get paid, you keep your credit worthiness for the future, and the new lender keeps everyone happy.

Before you choose to file for personal bankruptcy, consult with a lending specialist who can show you how consolidation may help your case. If it does, then you will find that it was worth the effort.

When should I file bankruptcy for myself or my business?

When to File Bankruptcy – The Last Resort

If you choose to file bankruptcy in your personal finances or your business, you should be sure that it is the best solution available. Many people and businesses in debt trouble file bankruptcy unnecessarily because they did not know of any other options they had. Bankruptcy is a viable option many times, but only as a last resort. Here are a few ways to tell when to file bankruptcy.

If you have accumulated debts that are beyond what you can afford to pay, this is the first sign that bankruptcy may be an option. However, you should first examine options that do not include this type of filing. Refinances, consolidations, and other services can be advised by credit and debt counselors and you should consult with one before you file bankruptcy notices. If no alternatives are plausible, then bankruptcy may be the only option.

If your business has too much overhead and is not generating the capitol to handle its bills, bankruptcy may be the only option. Many people believe that bankruptcy means a business goes under, but this is not the case. Bankruptcy is a shield that can protect a company and buy it some time to get back on its feet. Yes, your credit will suffer, but this is often a far better alternative than anything else.

For people wondering if they should file bankruptcy, be sure that this is the right option. Speak with a professional financial analyst or bankruptcy attorney to have them advise you on your best course of action. You can easily find this help and you will find that it may save you from making a major mistake.

Should I look into liquidation as an alternative to filing bankruptcy?

Liquidation as an Alternative to Filing Bankruptcy

Over the course of any life, we all acquire things that have assigned values. Cars, homes, furniture, or even electronics hold a value for a long time. If you are in the midst of a financial crisis and are looking for an alternative to filing bankruptcy, liquidation of these assets may provide you with the breathing room you need.

Liquidation is the process of selling off assets for cash. In this case, you would be liquidating your assets to pay off your creditors. Ironically, some of your creditors are most likely assigned to many of these assets. The easiest way to pay off a car loan is to sell the car. Even if you cannot get the whole value you need, every dollar you can accumulate will help. I am not suggesting that you put your dining room set on eBay or anything. There are certain things that one simply will never part with or cannot part with. However, when evaluating an alternative to filing bankruptcy it is important to remember that you could lose much of this stuff should you need to file for bankruptcy.

If you would lose your car in a bankruptcy filing, why not just sell it now and use that money to avoid the bankruptcy. You will still be without a car, but you will retain your credit score. Liquidation as an alternative to bankruptcy is about prioritizing your assets. Which can you live with or cannot live without? Ask yourself this question about all of your possessions and you may be able to generate enough money to fend off bankruptcy at least a little while longer.

Can a credit counselor help me identify a personal bankruptcy alternative?

Using Credit Counseling to Find a Personal Bankruptcy Alternative

For those that wish to avoid bankruptcy at any cost, there are personal bankruptcy alternatives available. In order to find these, you should speak with a credit counseling service that can give you a professional analysis of your situation.

After looking at your scenario, these companies can find you a personal bankruptcy alternative or they will not charge you a dime. Now, there are plenty of credit counseling services that are not what they seem. Be sure that when you are looking for a personal bankruptcy alternative that you speak only with accredited companies. You can check with you local or state department of business or with services such as Consumer Alerts and the Better Business Bureau to make sure your counselor is on the level.

Credit counseling is a great solution for most people who choose to give it a try. At the very least, these people can help you gain a better understanding of how you got into your predicament in the first place. If you do end up needing to file for bankruptcy, this information can help you avoid making the same mistakes in the future.

What is the procedure for filing bankruptcy in Florida?

Steps to Filing Bankruptcy in Florida

The process of filing bankruptcy is different from state to state. They all share some characteristics, but Florida in particular has a very set process with steps that must be followed. Here is a quick breakdown of this process.

  1. Gathering Paperwork – The first step is to itemize your income sources; major financial transactions for the last two years; monthly living expenses; debts (secured and unsecured); and property (all assets and possessions, not just real estate). Also put together your prior year's tax returns as well as any mortgage or deed notes that you hold.
  2. Filing Bankruptcy - Once you have all of your information you should then determine which property you believe is exempt from seizure based on the Florida exemptions. Florida has guidelines for what types of property can be included and which are exempt from bankruptcy procedures. Next, you will need to complete the two page form and submit it to your local district bankruptcy court. These forms, or schedules, ask you to describe your current financial status and recent financial transactions. Be accurate because if your creditors or judge discover that you have not been entirely forthcoming, it could jeopardize the outcome of your petition.
  3. Automatic Stay – After you have filed your paperwork with the bankruptcy court, an automatic stay immediately takes effect. This will prevent creditors from making direct contact with you or staking a claim on any of your property from the day of filing forward. This will stop any foreclosure proceedings.
  4. Assignment of a Bankruptcy Trustee – Once you file, the court will assume legal control of your debts and property. A trustee will be appointed by the court to see that your creditors are paid as much as possible. This person will review your paperwork, particularly the assets you have in your possession and the exemptions you wish to claim, and can challenge any element of your case as they see fit.
  5. Meeting of Creditors - Roughly a month after filing, the trustee will call a first meeting of creditors, which you are required to attend. Objections are typically resolved by negotiation between the debtor or the debtor's counsel and the creditor. If a compromise can not be reached, the judge will intervene.

After the last step above, your bankruptcy filing should take no more than six months to be completed. At that time, all of your debts will be discharged and you can start over towards a new financial future.

How can I avoid financial schemes?

If it Sounds too Good to be True...

It's an unfortunate fact of life that for every person who wants to help you, there is someone that wants to take advantage of you. Facing bankruptcy is not an envious position to be in, and you may not be thinking clearly at all times. Some companies understand the severity, and the gravity of your situation, and will try to charge you outrageous fees for their services. Others will just take your money and run.

The credit repair scam involves a company either calling or mailing you information on how you can increase your credit score dramatically in just a couple of days with just a tiny investment. You think to yourself, this sounds really good. What else do I have to lose? Your identity could be stolen or compromised, and that may be more difficult than a bankruptcy to rebound from. If it sounds to good to be true, well you know the rest.

What if I have equity in my home. How can I put that equity to work for me?

Consider a Home Equity Loan

Before contemplating filing for bankruptcy or reaching into your 401(k), getting a Home Equity Line of Credit (HELOC) or a Home Equity Loan may be a better option for you. This is an especially good option if you have significant equity in your home.

A HELOC is similar to a credit card. Your bank approves you for a predetermined amount, of which you can take the entire amount up front or make withdrawals periodically. Just like a credit card, the more you pay down, the more credit you have available to you. There interest in on a HELOC is typically lower than that of a Home Equity Loan, and may be tax deductible. However these rates can be variable, meaning they may change over time and could possibly increase.

A Home Equity Loan is similar to a HELOC, except for the fact that you get the lump sum upfront, and the interest rate is fixed. So the monthly payments stay the same for the life of the loan. Most individuals use home equity loans when they are trying to consolidate other high interest debts such as credit cards. If you have decent credit, and enough equity in your home, then either of the aforementioned products could work for you. Many banks offer these products so do the research to make sure you select the bank and loans that fits your needs.

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Susan Sayour