Bankruptcy Alternatives Blog

Five Reasons Why Debt Consultants Are A Bad Bankruptcy Alternative

Credit and debt consultants advertise that they can settle your debts for cents on the dollar. It sounds too good to be true, and usually it is. They put you on a monthly plan where you pay hundreds of dollars per month, and they tell you they will use that money to make a debt settlement with your creditors. In many cases a debt settlement or debt management plan is a scam. It sounds good, but here are five reasons why using a debt consultant to deal with your debts is not a good idea:

First, a debt consultant doesn’t work for free. They will take the first few monthly payments you make for their fee. If they take the first 10 monthly payments for their fee, and then take another 10 payments for the settlement offer to the one of your credit cards, it will be 20 months before the first credit card company gets any money. It is not likely that a credit card company will do nothing for 20 months when they are not getting paid. If they are not getting paid, they will continue to call you, and they may take you to court and sue you. That’s not good for you.

Second, debt settlements will not work on all types of debts. The government will not accept a deal to get rid of your tax debt. They want their money, and they don’t make deals, because if they make a deal with you, they will need to make a deal with everybody, and that’s a bad precedent for them to set.

Third, the debt consultant has no way to force all of your creditors to accept the deal. One or two of your credit card companies may agree to a deal, but if the others don’t agree and sue you, the deal will fall apart. You need relief for all of your debts, not just some of them.

Fourth, in many cases the debt consultant is not doing anything that you couldn’t do on your own. Putting money in a bank account for two years, and then sending it to the credit card company, does not take much skill. You can do that on your own.

Fifth, many debt consultants will meet with you, review your situation, charge you a fee, and then refer you to an American bankruptcy attorney, or a Canadian bankruptcy trustee or consumer proposal administrator! They don’t actually do anything for you, other than tell you that you need professional assistance. Start with the professional; don’t pay the consultant first.

You have options, including a debt consolidation loan, a Chapter 13 Wage Earner Plan, and a consumer proposal. You can even file bankruptcy in Canada, or Chapter 7 Bankruptcy in the USA. Consult an expert today and review your options.

How will new bankruptcy rules in Canada affect me?

Much has been written about the new bankruptcy rules in the United States that came into force in 2005. Less well known is the fact that new bankruptcy rules in Canada came into force in September, 2009. One of the impacts of the new rules in both Canada and the United States is that personal bankruptcy will cost more for many individuals.

In Canada, the new surplus income rules mean that if you earn over a set amount, you will be paying more while bankrupt, and your bankruptcy will last longer.

If you have good income, but also have high debts, it is important that you explore all bankruptcy alternatives to avoid paying a huge amount while bankrupt.

The two obvious alternatives to bankruptcy are a Chapter 13 Wage Earner Plan (if you live in the United States), or a consumer proposal (if you live in Canada).

There are pros and cons to both options, but in general it’s a good idea to avoid bankruptcy if possible. Consult an expert in the United States or Canada for more information.

Bankruptcy Alternatives: An Expert’s Advice

The editors of the Bankruptcy Alternatives Information web site are constantly researching ways to avoid bankruptcy. In the past we have discussed debt consolidation loans, credit counseling, Chapter 13 Wage Earner Plans, and Consumer Proposals.

Today we are pleased to report on a new research report from Dave Clark, a U.S. attorney with many years experience helping people in financial trouble. Here is his story:

I graduated with a BS degree in Economics and a minor in Finance. I worked as bank examiner for several years before going to law school. Once graduating law school with honors in 1984, I accepted a job as an associate in large metropolitan law firm and represented some of the largest and wealthiest corporations in the U.S. But it wasn’t satisfying. No, not at all.

I found my true calling and fell in love with practicing law again. I began working even harder, earning less at first, representing ordinary workaday consumers. I began thinking of large corporations as bloated whales, driven by arrogance and greed, as they systematically rolled over working moms and pops. I fell in love with the possibility of becoming the fastest barracuda in the ocean that could take a bite from whales anytime, anywhere and anyway I wished.

You see, I knew the attorneys representing large corporations. I had been one of them for 5 years. I knew their level of expertise and their tactics. I decided to up the ante and bring the fight to their front door. That was 20 years ago.

Today, there is no better reward for me than bringing in a verdict against arrogant bullies, unethical corporations, and wealthy despots. You and I together will see FOREVER from the top of a pristine mountain. My love for the law and this pure purpose still drive me. I smile often, daily, proudly, and remain more committed than ever before.

My life has purpose. I have destiny. There is nothing I would rather do.

I want to share it with you.

Everyone coping with a financial problem has extraordinary options. Your options are almost unlimited. The best results do require a solution designed with the end game in mind. You may want to compromise in one area to maximize another, to achieve the best overall outcome. With one strategy supported by many complementary tactics, your best results can be virtually guaranteed.

The best way to see your potential end results, in advance, is use a common measure. You may even want to mix and match the most profitable benefits and advantages of the following alternatives:

• Consumer Credit Counseling – the free course required as a condition of filing bankruptcy (certificate of completion required). They will try to create a monthly budget that pays all of your debts and bills.
• Debt Management Plans – a low cost service for renegotiating interest rates and penalties owed on unsecured debts.
• Debt Settlement Plans – a more aggressive service for settling unsecured debts for a percentage of the principal due, with payment spread out over several years.
• Debt Consolidation Loans – new loans requiring new approval to combine debts (Many dangers here).
• Home Equity Loans – new loans using your home as collateral to pay off other debts (Many dangers here).
• Chapter 7 – the complete discharge of most debts without payment of any kind. You can eliminate judgments, debts and contractual liability easily.
• Chapter 13 – the discharge of most debts after making partial payment over 3 to 5 years.
• Chapter 11 – both discharge and reorganization of debts in a plan of 5 years or more.
• Private Debt Negotiation – The individual settlement of debts yourself or with the assistance of an attorney.
• Litigation of Select Debts – Invalidating or settling debts through the legal system (without filing), with rights of discovery, deposition and jury trial to resolve disputes.

In my Bankruptcy Strategies manual, I explain the advantages and disadvantages of each of these alternatives. In some cases, using 4 or 5 of these alternatives creatively will maximize your end result. I have included a series of worksheets and instructions intentionally designed to help you find your ultimate solution.

You will see, in dollars and cents, how each of these alternatives could help you. You will complete worksheets in the privacy of your home to reveal your best option and potential savings. No more guessing. No more excuses. You will know how each option will change your life.

You will create a side by side comparison of your expected results over 5 years. This should be your common measure when comparing your costs, benefits, advantages and disadvantages. Once you know what to do (using included instructions and examples) completing my worksheets is easy by design.

There is no reason why most people cannot use all of these alternatives as they see fit. We are free to combine options and alternatives to design your beautiful solution.

Timing is Critical

Simply knowing that you have alternatives is not enough. You must use them at the proper time and in the proper sequence. Unfortunately, many people procrastinate with the best intentions. But as time slips away and they lose the ability to keep all of their exempt assets and discharge all debts.

Start early. A few weeks or a few months can make all the difference.

The best time to compare your options is when you first have problems paying your monthly bills. At this point, you may be able to avoid filing altogether, but also maintain all legal rights and benefits if filing later becomes necessary. Safe play. Highly profitable. You keep all property and assets and remain in control.

If creditors and collection agents are calling, you have less time to plan and fewer options. If you need to bankruptcy to stop foreclosure, eviction or repossession, your options are needlessly limited. But you still have many powerful and highly valuable options.

Success using an optimized bankruptcy strategy is not an accident. It takes planning. You must have time to first discover what you want, what makes the most sense for you, and have time to act. Then, your beautiful solution will unfold with uncanny precision and a full discharge of all debts will be quick and easy.

Think of it as a game. First you have an idea and decide on a plan. Then you line up all of the dominoes. Then you file. Then with the slightest flick of a a finger, everything falls in place, at the proper time, in the proper sequence, with automatic precision. Your competition will be dumbfounded. No problems. You were first to act. You win.

It is hard to find reputable information on your bankruptcy alternatives. For a credible review of your options, consult Mr. Clark’s book, Bankruptcy Strategies: Claiming Maximum Benefits Under Chapter 7 & 13. Find Out How The Pros Use Their Options Wisely And Beat Creditors At Their Own Game.

You have options, but only you can take action to deal with your debt.

Bankruptcy Toronto: A Case Study in Bankruptcy Alternatives

Are your bankruptcy alternatives different in you live in a big city? That’s an interesting question. To answer it, let’s take a look at one of the largest cities in North America, and discuss bankruptcy Toronto and it’s alternatives.

The advantage of living in a big city is that there tend to be more jobs. It may also be possible to live less expensively, since you may not need a car. In Toronto you can rely on an extensive subway and public transit system. However, your housing costs may be higher, as rent and other expenses may be higher in a city like Toronto.

So, if you live in a big city and you are trying to deal with your debt and you are considering bankruptcy, the first step is to do a detailed review of your monthly budget and see if you can deal with your debts on your own. If you can, you can avoid bankruptcy.

However, if your living expenses are too high to allow you to pay off your debts on your own, a bankruptcy in Toronto may be your only option. Whether you live in a big or small city, start with a budget to review your options.

Bankruptcy Alternatives During an Economic Crisis

The “credit crunch” of 2008 has lead to more government bailouts and a deeper recession in 2009; many experts are now even predicting a depression. What impact does this have on your bankruptcy alternatives?

Lots.

If your home equity continues to increase, and if you are getting lots of hours at work, you probably qualify for a debt consolidation loan. However, during a recession when your house is declining in value and foreclosures are on the rise, and when your income is going down, a debt consolidation loan is probably neither affordable or something you can qualify for until the economy bounces back.

If you have a good job and good income, Americans could file a Chapter 13 Wage Earner Plan, and Canadians could file a consumer proposal. Under these legal arrangements you repay a portion of your debts, and avoid having to file bankruptcy. However, to repay a portion of your debts you need an income, and if you are unemployed or working reduced hours, you may not have the income to do a Chapter 13 filing or a consumer proposal.

In other words, the recession has made it more difficult to take advantage of the bankruptcy alternatives that worked so well in the past.

What can you do? Cut your expenses, make a budget, find a part time job, sell any assets you have to raise cash, and ride out the storm. The economy will eventually improve; the trick is to keep your head above water long enough to allow you to benefit when the better times return.

How to Get Out of Debt Fast Without Going Bankrupt

Many people believe that personal bankruptcy is their only alternative when they have too much debt. While bankruptcy is necessary for some people, there are other options. (To learn more, Canadians should research bankruptcy in Canada, and Americans can also read more about personal bankruptcy).

A debt consolidation loan is an option for many people, where you combine all of your high interest debts, like credit cards, into one lower interest rate consolidation loan. In most cases you need good credit, or a co-signer, to qualify, so a debt consolidation loan will not be the solution for everybody.

A debt management plan through a not-for-profit credit counselor is another option to repay your debts and avoid bankruptcy. In many cases the credit counselor will negotiate a low or zero interest plan, so all you do is repay the principal with no further interest.

If you can’t afford to make a debt management plan, Americans can consider a Chapter 13 Wage Earner Plan, and Canadians can consider a consumer proposal to repay a portion of their debts. It is only after considering all alternatives that bankruptcy should be considered.

There are other approaches, so please read our special report on How to Get Out of Debt Fast Without Filing Bankruptcy today for more information.

What are my bankruptcy alternatives?

As the North American economy continues to weaken, and every day we read news of bailouts, we get even more worried about our own personal financial situation. What can we do? If you are experiencing money problems and you think that personal bankruptcy is your only alternative, start with our five step program to avoid bankruptcy.

First, make a family budget. If you don’t know where your money is going, you can’t decide what spending to cut to free up cash to repay your debts on your own. Read our special report on budgeting for more information, and for some free tools to help you budget.

If your budget shows that you can afford it, your next step may be to try to get a debt consolidation loan. With a debt consolidation loan you consolidate your debts and make one monthly payment, at a lower interest rate than you are paying now. You need good credit to qualify.

If you don’t have good credit, your next option would be to consider credit counseling through a non-profit credit counsellor about a debt management plan. They may be able to work out a plan where you repay your debts over a longer period of time, at a reduced or zero interest rate.

If that isn’t affordable, a legal procedure may be necessary. In the United States you could file a Chapter 13 Wage Earner Plan. In Canada you could consider a consumer proposal. Either way, it may be possible to negotiate a legal settlement where you pay less than the full amount owing.

If even that is not affordable then, and only then, should you consider personal bankruptcy. Bankruptcy is a last resort, only to be considered if all other bankruptcy alternatives have been considered. You have options, so consider them wisely, do your research, and then make the decision that is best for you and your family.

Chapter 13 Wage Earner Plan: A great Chapter 7 bankruptcy alternative

A Chapter 13 Wage Earner Plan is one of the best alternatives to bankruptcy for resident of the United States. It is similar to a consumer proposal which can be filed by people who live in Canada.

How Does a Chapter 13 Wage Earner Plan Work?

When you file a Chapter 13 wage earner plan, you are making a deal with your creditors to pay back all or some of what you owe them under a payment plan that you can afford. It is meant for people who earn regular wages but just can’t quite make the payments on their debts each month. The Chapter 13 bankruptcy can last up to five years.

Once you file a Chapter 13 petition with the court, an impartial trustee will be appointed to administer the case. They will evaluate your situation and help develop your plan and present it to your creditors who will then decide whether they will accept it or not. Typically, if you have taken the time with the trustee to be well-prepared, there will not be a problem with your proposed plan. Now, instead of making multiple monthly payments on your many debts, you will make just one to the trustee either monthly or bi-weekly, who will then distribute it among your creditors as has been agreed upon.

Who is Eligible for a Chapter 13 Wage Earner Plan?

Any individual person (not a corporation or partnership) is eligible for Chapter 13 relief as long as the amount of their debts does not go above $307, 675 for unsecured debts (those with no collateral) and $922, 975 for secured debt and they are earning wages that cover more than their reasonable living expenses. The person must also have received credit counselling from an approved agency within the 180 days prior to filing and had not been dismissed from another type of bankruptcy filing in this time period.

Why is it a Chapter 13 Wage Earner Plan a good idea?

The best thing about a Chapter 13 is that it helps avoid filing for Chapter 7 bankruptcy. By extending the length of time you will take to pay off your debts, your monthly payments will be smaller making it easier for you to get out of debt. Chapter 13 also offers the convenience of consolidation because you only make one monthly payment to the trustee who will deal with all your creditors for you. Once you have filed the petition, the creditors are no longer allowed to take any action against you in order to collect their payments.

The process of filing a Chapter 13 Wage Earner Plan is complicated and the rules change frequently. For example, the maximum amount of debt allowed to qualify is adjusted to reflect changes in the consumer price index. You should seek help from a professional to make sure you have all the information you need about a Chapter 13 before you file the petition with the court.

What are my bankruptcy alternatives if I own a house?

In 2008 in North America the real estate market has fallen significantly. Over 1 million homes in the United States are currently under foreclosure, and the numbers are falling in Canada as well. What can you do if you own a house, but can’t afford to pay the mortgage an all of your other debts?

First, you could sell your house. If you can sell it and get enough money to repay the mortgage, that might be your best bankruptcy alternative. Sell now, before your house falls even more.

Second, you could attempt to negotiate with your mortgage lender. They do not want to foreclose on your house, so they may be willing to extend your mortgage or give you more flexible payment options. You will not know unless you ask.

Third, you could attempt to get a debt consolidation loan to deal with all of your other debts, which may give you enough free cash to stay up to date with your mortgage payments. It may even be possible to get a mortgage debt consolidation loan to reduce the interest you are paying on your mortgage.

Fourth, you could file a consumer proposal or Chapter 13 Wage Earner Plan. Again, this deals with your other debts, not your mortgage, but it may give you enough financial flexibility to keep up with your mortgage payments.

Finally, if all else fails, it may be necessary to file personal bankruptcy. Every situation is different, so you will need to research to determine if you will lose your house if you file bankruptcy; the answer will depend on the value of your house, and the amount you owe on the mortgage, and where you live.

As you can see, you have bankruptcy alternatives when you own a home. To find out more, if you live in Canada, contact a bankruptcy trustee, or if you live in the United States, contact a bankruptcy attorney.

What if I Just Stop Paying My Debts? Is Not Paying a Good Bankruptcy Alternative?

At some point in almost everyone’s life we get to the point where we just through up our hands and say “Enough: My debts are too high, so I’m just going to stop paying!”

For some people that may be the correct option, but it does have one significant danger: If you stop paying, it is possible that your creditors will take you to court, sue you, and attempt to garnishee your wages. If you own property, like a car or a house, they could attempt to put a lien on your property, seize it, and sell it to repay your debt.

If you currently own no property or have no wages, you are “creditor proof”, so doing nothing may be an option. If you get a pension or welfare, it is unlikely that those payments can be garnisheed, so there may be little risk of a garnishment. You could open a new bank account at a new bank that is not known to your creditors, and continue on until your situation changes.

However, if you do have a job, doing nothing is probably not the correct option for you. You need to take action. Try contacting your creditors and working out a repayment plan. If you need help, a credit counselor can meet with to determine if a debt management plan is the correct solution for you. If you still have good credit, a debt consolidation loan is another possible option.

If you live in the United States, a Chapter 13 Wage Earner Plan is a good personal bankruptcy alternative. In Canada, a consumer proposal is an excellent solution in many cases.

The point to remember is that doing nothing may be an option, but there are many other bankruptcy alternatives, so research your options and decide on the option that’s best for you.