What Are Alternatives to Bankruptcy in California?

Many individuals may feel hesitant to file bankruptcy and want to look into alternative options to bankruptcy  in the state of California. Evaluating all of your options is critical for ensuring that you are making the best decision for your particular case. A debt settlement lawyer will be able to provide you with objective legal guidance that will help solidify matters for you.

Alternatives to bankruptcy in the state of California include the following:

• Debt Settlement:
  This is amongst the most favorable alternatives to bankruptcy. It's a great option if you are interested in calculating a repayment plan and interest rate that you are better able to afford. Lenders may also be able to reduce the amount that you owe, depending on the situation. 
• Debt Consolidation:
  Debt consolidations are loans offered by a consumer credit card service. It is a great option for individuals who feel berried in debt and are looking for help to be able to make payments. A debt consolidation loan can also provide you with a more affordable interest rate.
• Refinancing and Credit Card Negotiation:
  Refinancing involves altering your loan or mortgage payment in a situation that is no longer economical for you. You may be able to negotiate and refinance so that you are able to have more affordable interest rates and/or payments.
• Loan Modification:
  In order to apply for a loan modification, you will have to complete the process through your vendor. In order to qualify for the process, individuals will typically need to prove financial hardship. Once approved, you may be able to modify your monthly payments or mortgage payments at more suitable rates.
• Debt Management Planning and Credit Counseling:
  Debt management planning and credit counseling involved nonprofit organizations that may be able to provide credit counseling and help you boost your credit score by decreasing your monthly payments, late fees, and interest rates.
• Short Sale:
  A short sale involves selling your property (if your situation concerns your mortgage payment) at a lower rate than its true value. By doing that, you will be free from having to continue making any more mortgage payments, and will no longer owe money. This may be to your favor depending on your circumstances, as you will essentially be cutting your losses.

How Debt Settlement Works

Creditors will generally not agree to a debt settlement if they believe you have the means to repay what you owe. In other words, a debt will likely need to be seriously delinquent before a creditor will even consider negotiating a settlement.

If you know you will be unable to pay off a debt and wish to pursue a settlement, you may need to stop making payments. While this may sound counterintuitive, settlements are generally facilitated through lump-sum payouts. By stopping regular payments, you can put financial resources toward a lump-sum payment that may allow you to settle the debt for less than what you owe. In other cases, a settlement will involve a heavily adjusted payment plan with smaller monthly installments. Either way, a creditor must be convinced there is no means of extracting the full amount owed.

Debt settlement is not an option for all types of debt. Unsecured debts, including credit card debt and medical debt, can often be settled. You will not be able to settle debt involving a mortgage, vehicle loan, or any other type of property that can be foreclosed or repossessed. Tax debt can sometimes be settled directly with the Internal Revenue Service (IRS). Student loan debt cannot be settled, but you may be able to negotiate a modified payment plan. 

Debt settlement is not the same thing as debt consolidation. In debt consolidation, you take out a new loan for the entire amount owed, including penalties, and pay the new loan amount over many years with considerable interest. Some will choose to consolidate mortgages and end up paying more than three times what they originally owed.

Debt settlement is almost always more advantageous than debt consolidation. In a debt settlement, you will pay off the reduced amount over 24 to 36 months with no additional interest.

How Much Less Will I Pay If I Accept a Debt Settlement?

Every situation is different, but potential savings in interest alone can be dramatic. Most individuals experiencing debt crises are paying 24% or more in interest. This means that if you owe $5,000, you would have to pay at least $100 each month in interest alone. If that same debt were negotiated was negotiated to $3,600 over three years (36 months), the $100 per month would pay off the debt in its entirety instead of addressing accumulating interest. 

Our West Los Angeles debt settlement attorneys are aggressive negotiators. We will fight to save you as much as possible by working to secure the best possible settlement.

Do You Have Any Guarantees?

Other than a small account setup charge, our firm’s fees are paid based on our success in reducing or eliminating your debt. It is very rare that we will not be able to negotiate a favorable settlement with each of your creditors. In many cases, our services pay for themselves. 

How Will Debt Settlement Affect My Credit?

The reality is your credit rating is probably already in bad shape. Debts must become seriously delinquent in order for creditors to consider settlements, so falling behind on payments has likely done significant damage to your credit. 

While accepting one or more debt settlements will result in another hit to your credit, it can also represent the first step to credit recovery. Debt settlements will appear on your credit report for seven years, but if you take no action and allow your debts to mount, your credit will likely continue to deteriorate. In many cases, our clients have been able to substantially improve their credit within two to four years of accepting settlements. This outcome will involve faithfully making settlement payments and not getting into further financial difficulties.

Suggested Reading:

• You May Qualify For Bankruptcy Today
• Royalties Are Assets in Bankruptcy