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Alternatives to Bankruptcy  

       

        Filing for bankruptcy protection should only be considered as a last resort.  The alternatives to bankruptcy, although limited in nature and practical usefulness, generally involve negotiations with your creditors or utilizing the services of a creditor credit counseling service to negotiate on your behalf. The debt will not go away, but may become manageable allowing you to avoid bankruptcy.

 

     Some, but certainly not all, of the larger lenders will negotiate with their customers.  It is certainly in your best interest to make the attempt. Unfortunately many people who have tried are left with the impression that the lender would rather get nothing than negotiate to get something.  However, to be fair, the lender’s business is to collect on debt, not renegotiate it.

 

     As to the various credit counseling services, they must be approached with a certain level of trepidation. Do you remember all the television commercials for “non-profit” whatever promising to stop a foreclosure or to “consolidate” your debt? They could not deliver on the promises for a variety of reasons and you will note that these commercials are no longer clogging the airwaves.

 

     There are legitimate services that will help people to put their finances in order. The for-profit services will charge you a fee. The legitimate “non-profit” services will ask for a donation. Some questions to ask; What is the largest source of their funding or operating budgets? Are they locally based? Are references available? The answers will shed light on the organization’s motivation and level of “help” offered. Caveat emptor; let the buyer, you, be aware.

 

     A few words of caution if you are facing a foreclosure proceeding. There are a growing number of companies that “farm” court files and use the addresses to solicit people who are in an extremely vulnerable state of mind. They promise, for a fee, to stop the foreclosure and help you avoid bankruptcy. The fact is, if a foreclosure proceeding has commenced, payment of the arrears or a written agreement with the lender to make payments and stop the proceedings, or a bankruptcy petition are the only legitimate means to stop a foreclosure. A “promise” to do something, no matter how convincing, and no matter how much the debtor wants to believe, will not stop the foreclosure. What makes this practice so insidious is that while the debtor believes he/she has solved their problem the time for action may pass.

 

     Whether a fee is charged or a donation is solicited, these services can only do what you yourself could do, i.e., negotiate better terms for your debt. If you are considering alternatives to bankruptcy it is important to look at your options very carefully. Compare the alternative’s benefits to the bankruptcy laws, read the fine print, check references, and make the choice that is best for you.

 

                                         


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   The Law Office of DAVID W. REICHEL                        

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           Mesa, AZ  85201-5855                                 

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