Planning bankruptcy filing? Try other debt relief methods first

On Behalf of | May 24, 2019 | Bankruptcy |

Financial challenges arising out of accumulated debt are sometimes so overwhelming that many people find it difficult to cope with the pressures and force themselves into filing for bankruptcy. Bankruptcy is definitely a foolproof way of eliminating debt but a person should consider a bankruptcy filing only after exploring the other debt relief methods that are available. In fact, the Federal Trade Commission strongly recommends that people try various debt relief methods before they decide to file for bankruptcy.

As the FTC suggests, a good way to begin debt relief efforts is to talk to creditors and try to put in place a modified repayment plan. In order to achieve a favorable result in these negotiations, debtors can seek help from credit counsellors or debt relief attorneys who, in turn, would represent you while engaging in discussions with the creditors. The usual result of these discussions is a monthly debt repayment plan that the debtor needs to adhere to. Another way of obtaining debt relief is by taking out a second line of credit. However, one needs to remember that in most such cases, one’s home is kept as collateral.

In the event that a debtor is unable to find an adequate solution after exercising the debt relief options, it may be a wise decision to file for bankruptcy. For individuals, bankruptcy can usually be filed under Chapter 7 and Chapter 13 of the U.S. Bankruptcy Code. While a Chapter 7 bankruptcy filing requires the liquidation of all assets to repay the creditors, Chapter 13 bankruptcy provides a debt repayment plan that usually lasts for five to seven years. Which chapter suits a debtor depends on individual circumstances.

Obtaining debt relief, through bankruptcy or through other methods, is often a challenging exercise. This is mainly due to the various complicated federal and state laws that govern financial debt relief and reorganization for individuals. As the laws can be a maze, it may be a good decision to consult an experienced attorney. The attorney’s knowledge of the bankruptcy system and procedures can go a long way in making sure that a debtor is able to make educated decisions while looking to obtain debt relief.