If the debtor's financial problems are only temporary, he or she may want to ask creditors to accept lower payments or to schedule payments over a longer period of time. Creditors may be receptive to these ideas if the debtor has been a prompt payer in the past, or if the specter of bankruptcy is raised, since creditors know that once a bankruptcy proceeding is initiated they will probably collect only a portion of what is owed. In addition, creditors may wish to avoid the difficulties of a court proceeding to collect on the debt, which can be time-consuming and expensive.
Consumer Credit Counseling
Consumer credit counselors can also help creditors work out a repayment plan. Some so-called "credit counselors," however, prey on overwhelmed consumers, promising "a clean slate," often for a flat, up-front fee. They may promise to contact creditors and convince them to accept lower payments or to charge lower fees and interest rates. In many cases, unfortunately, the only ones who end up in better financial situations may be the counselors, not the debtors.
If a debtor's financial troubles are long term or if his or her creditors will not informally agree to an alternative payment plan, then bankruptcy may be the best way for the debtor to get out from under an insurmountable debt load. Although it is not without its adverse consequences, bankruptcy can be the right option to enable debtors to make a fresh start.