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Alternatives to Bankruptcy for Debt Relief

What bankruptcy alternatives are there for debt relief?

I filed chapter 13 bankruptcy and got behind on my payments. What bankruptcy alternatives are there for debt relief. The bankruptcy court sent me a letter saying they are going to dismiss my bankruptcy case if I do not pay what I am behind in 30 days. If they dismiss my bankruptcy is there still any debt consolidation relief available?

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Bill's Answer
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Bills.com | Find Learn Save

Thank you for your question. First, I want to assure you that you are not alone; many consumers find themselves buried in debt before they even realize what happened. You do have options. Now, on to your question.

Chapter 13

A Chapter 13 bankruptcy is a reorganization of your debts where you make monthly payments on a pay down plan (typically 5 years). If you break your Chapter 13 payment plan, as many people do, then your creditors essentially drop out of the plan and can come after you (or apply existing judgments that were entered).

If your financial situation has gotten even worse than when you filed the Chapter 13,  I recommend exploring a Chapter 7 bankruptcy (see your bankruptcy attorney) or seek a free debt consultation. If you follow the links below, I can put you in contact with a company that may be able to assist you in resolving these debts.

Quick tip #1:   
Very quickly, you can get a free debt consultation with one of Bill's approved debt help partners.

refinance

if you own a home, a secured debt consolidation loan may be right for you. this type of loan is essentially a home equity loan which is used to pay off your other creditors. secured consolidation loans help many consumers by consolidating all of their debts into a single monthly payment with a lower interest rate and payment amount.

unsecured debt becomes secured debt

be careful before you borrow money against your home to pay off credit cards and other unsecured loans; you will be converting what was previously unsecured debt into secured debt. this could cause you problems down the road if for some reason you are unable to make your payments, or if life circumstances force you to file bankruptcy, as you may not be able to discharge the secured debt as you would unsecured debt. however, secured debt consolidation loans work for many people, so this is an option to consider carefully. however, since you recently filed bankruptcy, even if you have equity in your home, you will find it difficult to refinance.  if you want to speak with a mortgage lender, to see if refinancing is an option, contact one of bills.com's pre-screened mortgage lending partners.

credit counseling

another option to consider is a consumer credit counseling service, or cccs. cccs companies offer numerous services, such as financial counseling and budget planning, as well as debt management plans (dmps). in a dmp, the cccs arranges a new payment amount with each of your creditors, usually based on a reduced interest rate. you then make a single monthly payment to the cccs , which distributes the funds to your creditors, based on the new payment amounts.

drawbacks of cccs

there are several drawbacks to cccs, though. first, depending on your creditors, it may not be able to reduce your monthly payments enough to improve your financial situation. second, it has a negative impact on your ability to obtain a loan. you may not wish to enter into a dmp if you anticipate any large purchases, such as home or an auto, in the near future. third, the average dmp takes around five years to pay off your debts, so you must be willing and able to commit to a long-term repayment plan. fourth, dmps have a high dropout rate.

debt settlement

you may also want to consider the services offered by debt settlement firms. rather than making monthly payments to your creditors, these programs negotiate lump sum settlements with your creditors, frequently reducing your debts by 50% to 60% of your principal balances. these programs usually take only 2-3 years to complete, so this is a good option for many people to rid themselves of debt in a relatively speedy manner. in most cases they can also  greatly reduce your monthly payment.  

credit impact 

there is one major drawback to debt settlement programs. they significantly damage your credit while in the program and for at least a year after. however, if getting out of debt is more important to you than the hit to your credit, debt settlement may be your best choice. because of your financial difficulties, you may want to stop focusing on the importance of your credit score. a debt settlement program is probably the fastest way to resolve you debts, outside of bankruptcy. once you repay your debts, you should be able to rebuild your credit score through careful management of your credit accounts.

i hope that one of the several options i have described above may be able to help you.

i encourage you to explore the bills.com website,  to read more about the debt help options available to you.

i hope this information helps you find. learn. save.

good luck,

bill

bills.com

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5 Comments

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  • BA
    Jan, 2009
    Bill
    Thanks shonna.
    0 Votes

  • 35x35
    Jan, 2009
    shonna
    I would just like to say that if anyone is unsure of provantas services, I highly recommend them. I used thier services a few years back and have nothing but good to say about them. YOu can check out my personal debt story. When you have decided that debt settlement is for you, please consider this company. In a world of companies trying to take advantage of the recession and other peoples misfortunes people are having a very hard time finding a good company. you can be sure that this company will handle your accounts with dignaty and respect and are really here for the people.
    0 Votes

  • RN
    Dec, 2008
    Richard
    Bill: Thanks for your recommendation as to the work ethics here at Provanta. I agree with your list. Richard Nikoley Founder / President Provanta Corp. www.provanta.com
    0 Votes

  • BA
    Dec, 2008
    Bill
    We would generally suggest that you find a company that has been in business for several years, is large enough to have relationships with creditors, has solid financial backing, and conforms to quality standards of the industry associations, including TASC and USOBA. We usually recommend Freedom Debt Relief and did a review here: Freedom Debt Relief Review Also, Century Negotiations, Able Debt Settlement, Debt Settlement USA, and Provanta are ethical companies that we believe work hard for their clients. Mostly, do your own homework and pick the one that feels right for you. Good luck Marta.
    0 Votes

  • 35x35
    Dec, 2008
    Marta
    Hi Bill, Cany you recommend a couple of reputable Debt Settlement Cos.? So often the internet is full of ads but, it's nearly impossible to know who is trustworthy and has a high success rate. Thanks, Marta
    0 Votes

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