When your debt is out of control, it can feel like you’re drowning and that you can’t possibly escape. Bills grow larger and larger by the month and interest payments keep accumulating. If you’re caught in this bind, you may be considering bankruptcy.
While filing for bankruptcy can be a great way to get a financial fresh start, it should be your last resort. Our Maine bankruptcy attorneys help clients every single day find relief from debt, but if you’re looking for alternatives to bankruptcy, you may have options.
In today’s blog post, we’ll be providing some alternatives, which may or may not be for you. A financial advisor, nonprofit credit counselor, or accountant can help evaluate your situation and plan a course of action. If you believe bankruptcy is the best option for you, contact a bankruptcy attorney at McCue Law Office in Bangor.
Debt Settlement
You can sometimes come to an agreement with creditors to pay less than you owe, which is called a debt settlement. This involves the creditor forgiving some of the debt and accepting partial payment in exchange for settling the balance. You need to be in default of your loans in order for debt settlement to work. Otherwise, creditors won’t want to forgive anything — after all, they’re still receiving minimum monthly payments.
Before you default or propose a debt settlement, consider what effect doing so will have on your future finances. It’s tricky, because the unpaid balance that creditors agree to take on is considered income, and will need to be reported on your tax return. More so, the amount you don’t repay will be reported to credit rating agencies and it could seriously hurt your credit score.
Lastly, when considering debt settlement, be careful if you’re dealing with a for-profit debt settlement company. You should not pay a fee to a company before it negotiates a deal with your creditor. The company may even charge a fee for each creditor, rather than an overarching fee. You shouldn’t go further in debt while trying to settle your current debt.
The major advantage of debt settlement is that you can get out of debt in around 2-3 years, while stopping collection agencies from harassing you. More so, you steer clear of bankruptcy court.
Sell Assets
If you’re deep in debt, you most likely have already sold some assets to try to pay back your debt. If your income isn’t enough to make debt payments and if you have any valuable assets, you may be able to sell them and rescue debts enough not to file bankruptcy. Know that if you file for Chapter 7 bankruptcy, there’s a good chance that you’ll be required to liquefy assets to pay off your debt. If you are a business facing bankruptcy, selling assets can help you avoid filing for bankruptcy.
When considering selling assets, think about how much money you’ll need to get your debt back to a manageable size. You’ll want to have a number in mind before you start selling, otherwise, you will still be on the treadmill of accumulating interest, just with fewer assets.
Credit Counseling
If negotiating with creditors and selling assets doesn’t work, consider credit counseling. A credit counselor can help you develop a debt-management plan with payments that you can afford. Sometimes, having an impartial, professional eye on your finances is all you need to get back on track.
If you do end up needing to file for bankruptcy, the law requires that you consult with a credit counselor first. Maine bankruptcy lawyers and bankruptcy court can help you find a credit counselor that you can contact before filing for bankruptcy.
McCue Law Office – Bangor Bankruptcy Attorneys
Our bankruptcy attorneys are here to help you if you need to file bankruptcy, but we also hope that you’re able to avoid needing to in the first place. We hope that you found this blog post to be helpful, and if you’re in need of our legal services, please contact our law firm. Our team has more than 35 years of experience advocating for our clients. Along with bankruptcy, our Maine law firm also specializes in personal injury, social security disability, workers’ compensation, and real estate. Contact us today for a free consultation.