No matter what the tag says, everyone knows that one size does NOT fit all.
Solutions to financial problems are the same way. And since no two set of circumstances are the identical, it’s important to recognize that filing for bankruptcy might be the right answer for some people and not for others. While bankruptcy often has a poor reputation, it is not an inherently bad choice or good choice. It can be vital protection for honest people who find themselves overwhelmed by debt. For others, it is simply not the best option.
To make an informed decision, consult the debt relief attorneys at Bunch & Brock. We can review your situation, explain your options in layman’s terms and give you professional advice about how best to tackle your debt. Based in Lexington, we have over 35 years of experience helping people throughout Kentucky face their financial stress. Our attorneys are ready to help you establish your financial goals, find the best path for your situation and move forward with your life.
If you are burdened with debt, you need the calm competence of a skilled legal team in your corner. Contact us to schedule a consultation.
Debt Settlement
If you are facing a financial crisis, there are alternatives to bankruptcy. Many of them involve negotiating with your creditors, who are often more willing to modify the debt than you might think. Creditors recognize that some repayment is better than writing off your debt as a total loss, so they may be willing to extend the terms (resulting in lower monthly payments), waive current payments in exchange for larger payments down the road, or reduce the amount of interest or principle due.
Debts of any kind can be negotiated, including credit cards, medical bills, and some loans. However, you can’t normally negotiate settlements on secured loans, such as home or auto, unless you’re willing to relinquish your house or car. While it is possible to negotiate with tax enforcement agencies like the IRS, they are not required to settle. It certainly doesn’t hurt to ask and negotiation can buy you some valuable time to get back on your feet. Be aware that debt settlement may result in tax consequences because the IRS treats the forgiven debt as income, but if the settlement deal is good enough, it may still be worth it.
Debt Consolidation
Similar to debt settlement is debt consolidation, which is an arrangement where many smaller debts are replaced with one larger one. For example, taking out one loan to pay off multiple balances, or transferring all your credit card debt to one card or line of credit. Consolidation can be a very effective part of an overall strategy that restructures debts into one monthly payment and a lower interest rate for faster payoff.
Two types of debt consolidation loans exist – one that is secured by equity in your home and one that is not. A loan not secured by your home means that a company simply lets you borrow money to pay off your debt. You make one monthly payment to the consolidation company and they deal directly with your creditors. If you consolidate your debt through a second mortgage or a home equity line of credit, you may also be able to lower your cost of credit and improve your financial situation. However, using your home as collateral is not something to be done lightly – late or missed payments could result in losing your home.
If you are considering consolidation, do not sign loan papers if you do not fully understand all of the terms. Loans that have repayment penalties, balloon payments, rate adjustments or payment adjustments are not bargains. Check out the rates and terms of a few loans before committing to one to make sure you are getting the best deal. And remember that a debt consolidation loan is still a loan that must be paid off. It should not be used as a short-term fix or it may contribute to a long-term problem.
Other Options
If you own anything of value that you don’t need, consider parting with it. Items like a second car, a collection of some sort, a boat or jewelry can earn cash when you need it most. Even if this only brings in nominal amount funds, it’s preferable to being forced to surrender the same property in a bankruptcy filing. If you have a mortgage, restructuring or refinancing it may be able to save you money that can be used to avoid bankruptcy or foreclosure. Reassessing your expenses and cutting back can also free up funds, though digging out of debt and staying out requires a long-term commitment to making a basic change in the way you handle your finances.
For people who have no valuable property or income left, a viable course of action is to simply do nothing. Debtors who have no assets or own only exempt property such as clothes or public assistance benefits are “judgment proof.” Sometimes, creditors will not sue when it is impossible to collect the debt. However, the default may remain on the defaulter’s credit record for up seven years.
We Can Help
Whether you’re deep in debt or struggling to stay on top of the bills, there’s a solution to your financial problems. However, it’s important to be informed before taking any action, especially if you are looking for an alternative to bankruptcy because going down that road can have adverse consequences in a subsequently filed bankruptcy. The Kentucky debt relief attorneys at Bunch & Brock can provide the necessary counsel and guidance for your situation. Let us put our knowledge and experience to work for you to make the best plan for eliminating or repaying your debts. We encourage you to contact our office by calling 859-254-5522 or filling out this online form.
Attorney Matthew Bunch
Matt handles complicated bankruptcies and debt restructuring in Chapters 11 and 13 for both individuals and companies. He has also negotiated with multiple creditors on behalf of his clients to avoid bankruptcy. Matt is the firm’s lead litigator and handles contract disputes, certain personal injury claims and general litigation. [ attorney bio ]
