Creditors do no like the hassle of collection proceedings. In order to avoid the collection process creditors will sometimes reduce the debtors expected payments, extend the time to pay, drop late fees or settle for a reduced amount. If your debts are not to high and you have some income, or you have assets you are willing to sell, negotiating with a creditor may be an alternative to bankruptcy.
Credit and Debt Counseling
The purpose of the credit counseling is to get you to sign up for a debt repayment plan instead of filing for bankruptcy. However, you will need steady income to be able to make payments to creditors. Before you choose a credit counselor or debt management plan you need to see if the agency has been approved by The Office of the U.S. Trustee.
If you have steady income a counselor will contact your creditors and let them know that you have sought assistance and need time to pay off your debts. Both the counselor and creditors will decide how much you must pay and how long. You have to make payments to the agency and in return the agency will make payments to creditors. The agency will receive a small percentage of the money.
The disadvantages of this option is that you do not have the protection of bankruptcy and if you miss a payment any one of the creditors can pull out of the plan.
Creditors Must Sue to Collect
Although I never advocate not doing anything and allowing creditors to sue, it may be an alternative to bankruptcy for certain debtors. Most creditors must sue you in court in order to get a money judgment against your income and property, except for taxing agencies and student loan creditors. However, there is an exception to the rule. A creditor that has collateral on a debt such as a car, can repossess the car or furniture when you default on that debt.
If you are willing to give up your property such as your car in order to be able to pay off other creditors, this can also be an alternative to bankruptcy. Furthermore if you are sued in court and loose much of your property is protected, such as basic clothing, ordinary household furnishings, food, social security payments, unemployment benefits, public assistance, 75% of your wages.
Stopping Bill Collector Harassment
Although bankruptcy puts an automatic stop on most collection efforts as soon as you file, you do not have to file for bankruptcy to get creditors to stop harassing you. Federal law forbids collection agencies form threatening you, lying about what they can do to you, or invading you privacy.
Under federal law you can legally force collection agencies to stop phoning or writing you by simply demanding that they stop. This is under the Fair Debt and Collections Practice Act, 15 U.S.C. 1692. Simply wright a letter to the creditor informing them that you want them to stop under the act.
Additional resources provided by the author
Although there are alternatives to bankruptcy, bankruptcy may be the right choice for most individuals. It offers more protection to debtors and many times allows debtors to eliminate all or most of their debts.