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Alternatives
Bankruptcy Alternatives
Consumer Credit Counseling
Non-profit consumer credit counseling companies may be able to help you by reducing your interest rates on credit cards. Although this generally won't result in a lower monthly payment, it will create a timeframe within which your debts will be paid off.
Consumer credit counseling deals only with unsecured debts. You cannot modify or reduce payments on automobiles, property taxes, back income taxes or mortgage arrears through consumer credit counseling.
Consumer Credit Counseling plans are reported as "slow pay" on credit reports
Debt Settlement
Debt Settlement often called debt elimination is a means of placing a power of attorney between yourself and your creditors. Your power of attorney holds your monthly payments in an account where they are kept without legal distribution to your creditors. Creditors will often settle a debt for less than full value if they can be paid in one lump sum.
Merely the fact that you have appointed a power of attorney creates no legal protection against your creditors, although under the Fair Debt Collection Practices Act creditors are required to place telephone calls to the power of attorney and not to you directly. Most debt settlement plans fail and wind up in lawsuit against the debtor.
Consolidation Loans
A consolidation loan is the combination of several credit cards into one. Debt consolidation loans are problematic because they don't cure the underlying problem of too much debt. Also if you've taken on so much debt that you're looking for a solution, the chances are you won't qualify for the low interest rates that you see advertised.
The bulk of people who try to solve their own debt problems by taking on another loan, usually leave several credit cards out of the loan so that they can keep on borrowing. Seventy percent of Americans who take out a debt consolidation loan end up deeper in debt after two years than they were when the loan was initiated.
HOME EQUITY LOANS
A home equity loan or line of credit is a mortgage on your home. A home equity mortgage may be the last thing you want to consider as a means of reducing your credit card payments. What you are doing in effect is taking an unsecured debt and giving it the most protected status possible under the law. You voluntarily turn it in to a mortgage against the most valuable asset in your life, your home. The biggest risk is that you could lose your home if you default on the mortgage
ZERO INTEREST CREDIT CARDS
Zero interest credit cards are often offered as teasers, enticements for you to switch credit card vendors. Even if you do qualify for low or single digit interest rates it won't last forever. Make sure you know know when the rate will end and what it is expected to jump to when it does.
Be aware that the low interest rate lasts only as long as you pay on time. Even a single missed payment can trigger a default in the advertised interest rate and put you back where you started from.
Doing nothing
The statue of limitations to sue on a debt is six
years. However by doing nothing most people only prolong the length of
time they remain in debt. Creditors tend to sue to protect their debt
before the statue of limitations runs. The judgment obtained thereby is
good for another twenty years. Once a creditor obtains a judgment it
becomes a lien on real property that you own. Even though the judgment
may not be being paid, you will never be able to sell your property and
give clear title without paying off the judgment, which includes the
court costs, attorney's fees and judgment interest rate that accrues.
Other types of bankruptcy
Chapter 11 reorganization is similar to Chapter 13 except that it is designed
primarily for business and commercial debt problems. Chapter 12 is also similar
to Chapter 13 and is designed for "family farmers".
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