Don't File For Bankruptcy Just Yet

It used to be that if for whatever reason, you found you and your family sinking in a sea of personal debt, invariably you could count on filing for bankruptcy as your last lifeline to solvency. The new bankruptcy law, effective since October 2005, changes all that. It is the largest overhaul of the United State's bankruptcy regulations since the nineteen seventies. In the old days, under the old bankruptcy legislations, the odds were in your favor. As a debtor, you had a good chance of ridding yourself of your most onerous debts. As a result, odds were that you would be able to get back on your feet. Unfortunately, with the new law, the odds have shifted in the direction of the creditor. The laws have essentially been changed to discourage bankruptcy filings by making them tougher to get. In addition, the new adjustments make it more challenging to write off many of the bad debts that were allowed under the old rules. This calendar year, in excess of one and a half million U.S. citizens will file for bankruptcy protection. Deciding to file for bankruptcy has never been an easy decision but the changes in the law make it more important than ever that you first look for viable alternatives before you file for bankruptcy. Doing A Negotiated Settlement The most effective alternative to filing for bankruptcy is to work out some kind of negotiated settlement deal with your creditors. This is a very flexible alternative and can take many forms. Creditors do not like doing this but they recognize that it's much better than taking you to court and possibly risk getting nothing at all. The most common type is where the creditor will agree to write off a significant part of what you owe in exchange for a lump sum repayment of a considerably lesser amount. Why would a creditor do this? In many cases it's simple economics. Lenders already have overhead built into the loan. They have already recouped all or most of their expenses through what you've already paid. The agreed upon lump sum will be designed to make up for the rest. Another popular type of arranged settlement is one where the debt is not lowered but merely postponed. This is great if, for example, you've had a hard time finding a job with enough income to support you but you are expecting job market conditions to change in the near future. In this case, you may be able to convince the creditor to let you "skip" a few month's payments until you get back on your feet. In the event your credit card company hasn't approached you regarding a thing known as re-aging, you should ask them about it. Often, under certain conditions, they will adjust your account in a way to make it easier to repay. More specifically, they will offer to bring your account up to date. This way, you will not longer be behind in your payments. The tradeoff is that the amount you owe may or may not be changed, depending on their guidelines. Sometimes, the amount you owe will remain the same with the loan itself extended. As an example, if your last payment was due on May 2, 2011 and you receive a three month re-age, your last payment would be changed to come due on August 2, 2011. Consolidating Your Debts The reduce your debt rage right now, at least if you watch early morning television is consolidating debts. It is often held up as the perfect way of avoiding filing for bankruptcy. Unfortunately, debt consolidation does not usually reduce the amount of money that you owe. What it does is consolidate your debts into fewer payments. Not only that, but quite a few debt consolidation services come with non-refundable upfront fees and other unnecessary debt educational services which rather than decreasing your debt load, makes it higher. Sad to say, due to the latest bankruptcy laws, you don't have as many options as you once did. Therefore, it is more important than ever to seriously seek other solutions before making your filing.

David Hoyer is a freelance writer who writes articles relating to chapter 7 bankruptcy informations and stop garnishment and other financial issues. To read additional bankruptcy related articles, visit his site.