A Bankruptcy Alternative May Be Right for You

What is Bankruptcy?

Bankruptcy is a legal action that turns your assets into cash and uses that to pay off your creditors. It is basically a reorganization, or liquidation, of your assets. Some of us might face BK at some point in our lives. A lot of people are one life event – a health issue, unemployment, divorce, lawsuit — away from bankruptcy.

Bankruptcy is designed for desperate consumers who are unable to pay their bills and need to be released from existing debts immediately or restructure it for repayment. It may allow the consumer to start over financially.

What Are The Different Types of Bankruptcy?

Once you decide that bankruptcy is the right choice, you must decide which type to file.



The type of bankruptcy depends on whether you file as an individual or as a business owner. You also need to know your state’s bankruptcy laws and requirements.

Find out more information about how bankruptcy works here.

The Pros and Cons of Bankruptcy

Typically, you want to hire a lawyer in your state when you are considering filing. There are clear pros and cons with bankruptcy, so go over your options carefully with an attorney.

Some bankruptcy pros and cons are listed below.

 Pros of Bankruptcy

• Stops Bill Collections – No more collection calls and letters.
• Eliminates Credit Card Debt – Depending on the BK you file, and the type of debt you have, all your debts might get wiped away.
• Allows the opportunity to start rebuilding your credit – Enjoy a fresh financial start!

 Cons of Bankruptcy

• Damaging to your Credit – It stays on your credit report for 7-10 years depending on the type of bankruptcy that was filed.
• Cost of Filing and Lawyers – Bankruptcy can be expensive. There are filing fees, and lawyers can cost thousands of dollars. Make sure to check all your options carefully.
• Physical and Mental Drain – Until your bankruptcy is finalized, you could still get creditors’ harassing phone calls and threatening legal letters. Many people agonize over the stigma of bankruptcy.
• New Credit and Loans – Your credit will probably take a severe hit. You will, at some point, need to start rebuilding your credit. It’s very difficult(but not impossible) to get approved for new loans with a bankruptcy on your credit history.
  

Alternatives to Bankruptcy

Bankruptcy is typically a last resort. Explore all your options before filing for bankruptcy. You may want to file if all your alternatives fail. Here are some alternatives to consider first.

• Contact Your Creditors and try to work out an installment or repayment plan. Chances are your creditors will work with you.
• Consider Credit Counseling to help you negotiate with your creditors. A good credit/debt counselor will help you negotiate lower interest rates and smaller payments, and work out an installment plan to pay back your debts.
• A Debt Consolidation Loan may be a viable option. A debt consolidation loan allows you to pay off your creditors. You’ll then have to repay the loan.
• Check Out Debt Settlement Options. With debt settlement, you may be able to get a more affordable payment. Get a Free Debt Settlement Consultation from Pacific Debt Inc
• Sell Your Valuables and pay your bills. This is known as liquidation. If you’re in dire need of cash, liquidate anything you can. Your car, expensive jewelry, stocks, bitcoin, etc. will fetch good money to help pay your debts.
• Ignore it all and do nothing. If you have no assets and are taken to court by your creditors, a legal judgment against you means nothing. It’s against the law for creditors to come after basic necessities like clothing, food, furniture — what you need to survive. This is a risky option! Seek legal counsel before taking ANY option.
  

Pacific Debt Relief can help you avoid bankruptcy from their Debt Settlement Program. Stop drowning in debt and explore your debt settlement options today. If you are unsure on what to do next, visit our debt relief page and click on your state to get started.

Debt Consolidation vs Bankruptcy

If you are strongly considering bankruptcy, you’re probably pretty stressed out! Before you take that final step, look at the pros and cons of debt consolidation.

Pros of Debt Consolidation

• Not public domain or public information. Bankruptcy becomes part of your credit report for up to ten years.
• Merges all outstanding debts into one single monthly payment. This is a great method to manage all those monthly payments. A bankruptcy may erase debt, depending on which type you have.

Cons of Debt Consolidation

• Secured loans. You’ll have to put up collateral, like your house, in exchange for a lower monthly interest rate. If you default on your loan, the creditor can come after your house.
• Very large debt can be difficult to pay off. Bankruptcy might be a better option if you have a lot of debt, no assets, and do not intend to apply for a loan anytime soon.
• Bad credit score – since this happens with both debt consolidation and bankruptcy, talk to a legal specialist to examine all your available options.
  

Debt Consolidation vs Bankruptcy

Bankruptcy can be very expensive. The most expensive part is your legal expenses. Many people file for bankruptcy on their own because of that. It is a bit complicated, so follow the steps below to help streamline the bankruptcy process. If you find this process overwhelming, consider using an attorney in your state who specializes in bankruptcy.

1. File your Means Test. This is a test to determine eligibility for the bankruptcy.
2. Request your credit report from all the major credit bureaus. You need all of them because creditors do not report to all the bureaus.
3. Equifax 1-800-685-1111
4. Experian 1-888-EXPERIAN (397-3742)
5. TransUnion 1-800-916-8800
6. PMBC/Microbilt 1-888-222-7621
7. SageStream 1-888-395-0277 (Option 1)
8. Fill out all necessary paperwork. You can download these forms. The following is a list of all forms that may be required. Pick the forms needed for your individual case. Your specific state will have additional paperwork.
9. B 101 Voluntary Petition for Individuals Filing for Bankruptcy
10. B 101A Initial Statement About an Eviction Judgment Against You (if you have eviction judgment)
11. B 101B Statement About Payment of an Eviction Judgment Against You (if you have eviction judgment)
12. B 103A Application for Individuals to Pay the Filing Fee in Installments
13. B 103B Application to Have Chapter 7 Filing Fee Waived
14. B 106 Summary of Your Assets and Liabilities and Certain Statistical Information
15. B 106A/B Schedule A/B: Property
16. B 106C Schedule C: The Property You Claim as Exempt
17. B 106D Schedule D: Creditors Who Hold Claims Secured by Property
18. B 106E/F Schedule E/F: Creditors Who Have Unsecured Claims
19. B 106G Schedule G: Executory Contracts and Unexpired Leases
20. B 106H Schedule H: Your Codebtors
21. B 106I Schedule I: Your Income
22. B 106J Schedule J: Your Expenses
23. B 106J-2 Schedule J-2: Expenses for Separate Household of Debtor 2
24. B 107 Your Statement of Financial Affairs for individuals Filing Bankruptcy
25. B 108 Statement of Intention for Individuals Filing Under Chapter 7
26. B 121 Your Statement About Your Social Security Numbers
27. B 122A-1 Chapter 7 Statement of Current Monthly Income
28. B 122A-1 Supp Statement of Exemption from Presumption of Abuse (only if you qualify)
29. B 122A-2 Chapter 7 Means Test Calculation (if your income is above your state median)
30. Attend a meeting of creditors. Your creditors won’t be there. Answer all questions to the best of your knowledge.
31. Complete a financial management course.

If you’d like to find out more information on Bankruptcy, check out our article on The Top Ten Most Common Bankruptcy Questions. You should also contact a lawyer in your state to go over your options.

Conclusion About Bankruptcy

Before you file for bankruptcy, look at all your available options. It is not a step to take lightly! It is expensive and time-consuming, most people hire a lawyer to file a BK. We strongly encourage you to talk with a lawyer in your area BEFORE you make any decisions.