When considering your debt relief options, it is important to realize that bankruptcy may not be your only choice. Many people, whether because they do not qualify or they simply wish to avoid pursing a bankruptcy action, can and often do avail themselves of the alternatives to bankruptcy, which can be highly effective at helping people regain their financial footing. With this in mind, consider the following bankruptcy alternatives, which should help you to determine whether one of these options may be right for you:
Private Debt Settlement
Debt settlement is a private renegotiation of the terms of your indebtedness with your creditors. Creditors can be tough to negotiate with since they are often represented by seasoned financial professionals and because their bottom line is always about making a profit. Nevertheless, if you are under financial distress, creditors might be willing to renegotiate the terms of your indebtedness because they might have little to gain if you default or file for bankruptcy. A skilled Michigan bankruptcy attorney can help you renegotiate interest rates and payment schedules in a way that is more manageable for your budget. Your attorney might even be able to coax your creditor into writing off part of your debt. Once you have reached an agreement with your creditor, your attorney can put it into writing. Once you and your creditor have signed it, it will be legally binding upon both of you. As soon as you have met the terms of the agreement, you debt will be legally discharged without the credit blemish that a bankruptcy may represent.
Mortgage Refinancing/Loan Modification
If your primary concern is losing your home, bankruptcy is not your only option to prevent foreclosure. One option is to seek a mortgage refinancing, in which you obtain a new mortgage to pay off your current one. This will benefit you if your new mortgage is granted on more favorable terms than your existing one. A disadvantage of refinancing is that you might have to requalify for the mortgage through verification of information such as your income and credit score, which could cause your application to be turned down. In some cases, your lender may be willing to waive some or all of these requalification requirements. If your current mortgage is backed by the Federal Housing Association (“FHA”), you may be eligible for a FHA streamline refinance, which waives verification requirements.
If you don’t qualify for a mortgage refinancing, you could seek a voluntary loan modification from your lender. This is a form of private debt settlement in which you simply ask your lender to unilaterally modify the terms of your current mortgage without going through the refinancing process.
Debt Collection Laws
If you are “judgment proof” (meaning that you have no assets for creditors to seize), your primary concern may be to simply stop harassment and abuse from creditors. Michigan has enacted debt collection laws that might be able to help you in this regard, and a good attorney can assist you in enforcing them. These laws can benefit you in ways you might not expect even if you are not judgment proof – you might use potential legal claims against an abusive creditor, for example, to forestall a lawsuit or assert counterclaims.
Debt Counseling
Debt counseling agencies help debtors create payment plans to satisfy their debts and work with creditors to secure approval of these plans. Although on the surface this solution seems to resemble a Chapter 13 bankruptcy, in reality it suffers from significant disadvantages compared to bankruptcy. In a bankruptcy, the court issues an automatic stay that legally bars your creditors from suing you or seizing your assets without permission from the bankruptcy court. Under a debt counseling plan, you have no such protection. Moreover, these plans normally require you to repay 100% of the amount you owe, which is often not the case in bankruptcy.
Why Nancy Neal Joyce?
Nancy Neal Joyce has been arranging alternative solutions on behalf of her clients for nearly twenty years. She will listen to you carefully, recommend the debt solution that is right for you, and help you execute a proactive debt relief plan. If you would like to arrange a free consultation with Ms. Joyce, call her Livonia, Michigan office at (734) 427-7772.
