Bankruptcy Alternatives

There are several possible alternatives to bankruptcy for those in financial trouble and are listed below. It is important that when debtors consider these options they investigate the organizations they are dealing with and make sure they do not do anything that places them in a worse situation. Some bankruptcy alternatives might have an impact on a subsequent bankruptcy filing if the alternative route does not work.

Having said that, it makes no difference which of the below options you select but you should consider one of them and here’s why. Everyone must understand this revealing fact about the “mathematics” of paying the minimum payment you are billed for each month.

Fact is…If you pay the minimum payment you are billed for each month by your credit card company it is mathematically designed to take you 31 years and 2 months to repay that debt…no matter what the balance is when you start. And you will pay more than 5 times what you originally owed.

Next, consider these revealing facts on interest versus income:

If you go to work today and make $1.00 for your efforts you will be taxed for state and federal taxes, social security, and other taxes approximately 41 cents of that dollar.

Now, in order to pay for the necessities of life…food, rent/mortgage, car payments, clothing, etc you will spend approximately 38 cents of that same dollar.

Now comes your dreaded credit card statement and monthly bill. It’s a fact that 90% of all credit card companies charge between 18%-24% interest per year on the balance. That translates into 18 to 24 cents of that dollar goes to credit card interest…not counting late fees, over-limit fees, and other fees they dream up.

Now, let’s recap:
+$1.00 Earned for your work efforts

-41 cents for taxes, etc
-38 cents for necessities of life
-18 cents for credit card interest for the next 31 plus years

-97 cents total outgo

+03 cents left over from every dollar earned!

This means you have PENNIES out of every dollar left over to save for children’s education, retirement or merely enjoying the fruits of your labor. Give me a break! Are you mad yet?

Today may be a painful day for you. Your phone never stops ringing at home or at work with calls, threats and demands for payment. Your family life is stressed as is your job security.

If today is stressful, tomorrow doesn’t have to be. You can end the stress if you take action and we can help!

We can help you eliminate your bad debt. You can control debt; it doesn’t have to control you. We can help you get your life back. That is our mission. It is our goal. It is our commitment to you.

We Can Help You Face the Problem … It Won’t Go Away on Its Own!

Please review the following options as they may apply to your situation:

1) Use your Assets:
If you have assets with some significant equity, such as a home or a car you may be able to use these to get control of your debt. For example, you could get a loan on your home sufficient to pay off your debts. You could be saving a considerable amount of money on interest if you pay off high interest credit card debt in return for lower cost debt.

If you have a car, consider selling it, paying off your debts and buying a cheaper car. Be careful though! Your don’t want a “cheaper” car that will cost you a fortune in repair costs.

2) Get a Second Job:
Use the money from this job to only pay off your debts. List your debts noting the interest rates. Pay off the debts with the highest rates first and work your way down the list.

3) Put your Credit Cards on Hold:
One of the best steps you can take to get out of debt is to immediately stop using credit cards. At the very least destroy all your cards keeping just one card for emergencies.

4) Set up a Repayment Plan:
Cut back on your expenses and/or use freed up cash to pay down your debts. Pay off the debts with the highest rates first and work your way down the list.

5) Get a Consolidation Loan:
Equal Access does not offer debt consolidation services and we urge you to investigate any company offering such services. As you explore your debt relief options on the Internet and elsewhere, you will be bombarded with calls to “consolidate your debts” in order to “avoid bankruptcy” and “save your credit”.

Although this sounds like a good idea, there are things you must know:

Debt Consolidation Cautions:

They make you sign a binding contract with the debt consolidator.
They make you give them a power of attorney.
They may not get an interest rate reduction.
They will most likely pay their own fees before paying your creditors.
Your credit will continually suffer even more after debt consolidation than before.
Debt consolidation is a largely unregulated industry, with no rules.
They offer no guarantee that your money will actually go to creditors.
To give you an example of what has happened and does happen far too often, we will summarize the case of Simmons v. Daly, Murphy & Sinnot Law Center, 2003 WL 21267184 (Conn. Super. May 15, 2003).

In this case the consumer retained the defendant, Law Center, to negotiate with her creditors to reduce her debt. The Law Center promised to negotiate a settlement for a fee of a third of the amounts saved. Under the contract, the consumer agreed to transfer funds directly from her checking account to Law Center to pay the consumer’s debts.

The consumer paid $2,300.00 a month to the Law Center for about five months for the payment of her debts. Notwithstanding all of the payments to the Law Center, the money did not go to her creditors. The consumer was sued by one of her creditors for nonpayment.

The consumer sued the Law Center and won a judgment based on deceptive acts and consumer fraud.

The Bad News:
A judgment is not money in the bank. It has to be collected from the judgment debtor, in this case, the Law Center. It has been observed that companies that are set up to defraud the public shut down quickly and then reopen under different names and are right back at their bad deeds.

The Good News:
The United States Constitution provides protection for all of us and provides that the United States government itself will guarantee that our debts can be either eliminated or consolidated in a timely and efficient way through either a Chapter 7, Chapter 13 or chapter 11 bankruptcy.

The Bottom Line:
A consolidation loan can make lots of sense especially if you use Debt Negotiation as an alternative. Getting a loan to pay off all your debts at less than 50 cents on the dollar and have just one payment to make. The new loan will have a smaller payment and a lower interest rate since your are borrowing less money (please note that this service is not offered by Equal Access in Arizona as only attorney’s are permitted to perform this service.)

Most of all, give any offer to consolidate debt a very careful review and review ALL of your options before signing the bottom line.

6) Use the Services of a Debt/Credit Counseling Service:
Debt counseling services may be a start in helping you deal with your financial difficulty in that they offer to consolidate your monthly payments and obtain payment or interest reductions on your unsecured debts. The only problem with debt counseling is that many people are in such financial trouble that they will not qualify for debt counseling because they will not be able to repay their debt even under the best of terms.

There are two types of credit counselor, for profit and “nonprofit”. We do not distinguish between the two as they provide similar services and both charge a fee. Credit counselors can assist you in acquiring the discipline you need to get control of your debt but, Be careful! Many people do not fully understand all the ramifications involved such as:

Negative impact on your credit rating.
The credit bureau will record that a credit repayment plan is in place.

Are your payments too high?
Your payments should be high enough to significantly reduce your debt but not so high that you have “no life”. If you do not have money left over at the end of the month to pay for the small pleasures in life you may find that you end up defaulting on your payment plan and all the money paid will be wasted if you end up in bankrutpcy court.

For how long should you pay?
Most experts feel that the term should be three to four years. It is a stipulation in the new Bankruptcy Reform Bills that the term be 3-5 years. Terms longer than this have a very high failure rate, because people cannot see a “light at the end of the tunnel”.

Before signing any contracts please read these articles first!

Sept. 11 ’03 – State of Missouri Sues Credit-Counseling AmeriDebt
October, 24 ’03 – AmeriDebt to Stop Seeking New Customers Because of Recent “negative publicity.”

7) Informal Proposal – Payments over time:
In some cases you can make a proposal to your creditors to set up a payment plan that will allow you to pay your creditors in an orderly way and thus help preserve your credit rating. This operates similar to a debt counseling services whereby you are asking for either a reduction in interest or a no-interest plan.

Ok…That’s about all there is to offer as alternatives. If none of the above applies to your specific situation you may want to consider one of the following options:

8) Chapter 13
You are probably a good candidate for Chapter 13 bankruptcy if you are in any of the following situations:

You have a sincere desire to repay your debts, but you need the protection of the bankruptcy court to do so. You may think filing Chapter 13 is simply the “Right Thing To Do” rather than file Chapter 7.
You are behind on your mortgage or car loan, and want to make up the missed payments over time and reinstate the original agreement. You cannot do this in Chapter 7 bankruptcy. You can make up missed payments only in Chapter 13 bankruptcy.
You received a Chapter 7 discharge within the previous six years. You cannot file for Chapter 7 again until the six years are up.
You have a co-debtor on a personal debt. If you file for Chapter 7 bankruptcy, your creditor will go after the co-debtor for payment. If you file for Chapter 13 bankruptcy, the creditor will leave your co-debtor alone, as long as you keep up with your bankruptcy plan payments;
You are a family farmer who wants to pay off your debts, but you do not qualify for a Chapter 12 family farming bankruptcy because you have a large debt unrelated to farming; and/or,
You have a tax debt. If a large part of your debt consists of federal taxes, what happens to your tax debts may determine which type of bankruptcy is best for you.

For specific details about Chapter 13

9) Chapter 7
If the above mentioned alternatives don’t work for you, Chapter 7 bankruptcy offers a quick solution to getting out of debt.

For specific details about Chapter 7