Utah Bankruptcy Lawyer Explains…

Alternatives to Chapter 7 or 13 Bankruptcy

For those dealing with financial hardship, filing for Utah bankruptcy may seem to be the best or only solution to solve debt problems. But did you know that there are other alternatives that you should consider to help your financial situation?

First, tell creditors to stop harassing you. If creditors are constantly harassing you with abusive language, constant phone calls or threatening letters, even filing for bankruptcy may not stop them. The best way to stop abusive creditors is to learn and utilize a wide range of federal and Utah State debt collection laws, which are designed to protect the public from harassing debt collectors. By knowing the law (or utilizing the services of a Utah bankruptcy lawyer), you can turn the tables on an abusive debt collector and demand that the harassment end. The following links provide more information from the Federal Trade Commission and Utah State Law Library:

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf

http://www.utcourts.gov/lawlibrary/blog/2009/02/fair_debt_collection.html

Second, negotiate directly with the creditors for more favorable terms. If you are currently working, have additional income or assets, or are willing to sell some of your property or assets, you may want approach your creditors and negotiate for better terms. You may be able to negotiate lower monthly payments. Better yet, your creditor may agree to settle your debt for a smaller amount than you owe. It never hurts to ask.  Many creditors would prefer some form of payment, as opposed to having you file for bankruptcy. Plus, negotiating with your creditors may buy you time to get back on your feet. If you have questions, feel free to contact our Utah bankruptcy lawyer.

Third, enlist outside resources to devise a repayment plan. If you lack confidence in your ability to negotiate with creditors, you can always look to a non-profit credit or debt counseling agency, which can help you create a repayment plan that can then be presented to your creditors.

To locate the closest credit/debt counseling agencies in Utah, we recommend the following page from the United States Trustee website:

http://www.justice.gov/ust/eo/bapcpa/ccde/index.htm

If you participate in a debt management program, you may find it similar to filing for Chapter 13 bankruptcy protection as the credit/debt counseling agency helps you create a schedule to pay back your creditors over time.  The advantage of utilizing a credit/debt counseling agency – and not Chapter 13 – is that your credit record does not show a bankruptcy.

You should take note, however, that a debt management program also has some problems when compared to Chapter 13. If you miss any payments, Chapter 13 bankruptcy protects you from creditors’ collection efforts, while a debt management program offers no such protection.  Also, a debt management program is usually set up to repay your debts in full. With Chapter 13 bankruptcy, you may only need to pay a fraction of your unsecured debts. A Utah bankruptcy lawyer can help you decide which action may be best for you.

One final area of concern: some consumer advocates worry that many credit/debt agencies receive some or all of their funding from creditors. This relationship can create a possible conflict of interest.

And finally, you can do nothing.  This may surprise many people.  For people who are deep in debt and have very little income and assets, you may be seen as “judgment proof.” This means that you are not a good candidate for a creditor to sue you and obtain a court judgment against you. When you’re judgment proof, any creditor who sues you and obtains a court judgment won’t be able to collect from you simply because you don’t have anything they can legally take. In addition, a creditor can’t take your essential items, such as personal clothing, household furnishings, personal effects, food, payments from Social Security, unemployment benefits, or public assistance programs. Instead, your creditors will most likely write off your debt and treat it as a deductible loss. After several years, the creditor will not be legally able to collect the debt. In seven years, the debt will come off your credit record.

You may ask: if I do nothing, won’t I end up in jail?  Usually, you can’t be thrown in jail for not paying your debts, unless you are refusing to pay your taxes (as a protest against the government) or you ignore court-mandated child support payments.

Contact a Utah Bankruptcy Lawyer

As you can see, dealing with insolvency issues can be complex.  If you think that Chapter 7 or Chapter 13 bankruptcy is still the best option for you and your family, contact Craig Swapp & Associates at 1-800-404-9000 or contact us online.  Speaking with an experienced Utah Bankruptcy lawyer and legal staff can help answer your questions and determine which option is best for you.