Alternatives to Bankruptcy

By Sarah Reilly

Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Under the U.S. Constitution, you have the ability to relieve all or part of your debts when you can no longer meet your obligations to creditors or lenders. The major types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7, which allows debtors to discharge all or part of their debt, and Chapter 13 allows debtors repay all or part of their debt based on a payment plan. For many people they have a hard time making the decision to file for bankruptcy because they fear the repercussions or loss of their assets.

For these people there is hope because there are alternatives to filing for bankruptcy. One such alternative is talking to the creditors and negotiating with them to lower interest rates, increase the time between payments or even asking them to forgive some of the debt. Many creditors would be willing to work with a debtor to get their money back then have to deal with all the legal logistics of a debtor who has filled for bankruptcy.

Other options include working with a third party to design a payment plan or become a participant in a debt counseling management program. These types of programs are designed to help you come up with a plan on how to get your finances back on tract.


References:
http://www.bankingquestions.com/bankruptcy/2008/q_1121_bankruptcy.html
http://credit.about.com/od/debtmanagementsolutions/a/bankruptcytypes.htm
http://www.nolo.com/resource.cfm/catID/575C3BE9-F0C1-448E-B5F43D22FE36E9F2/213/161/176/