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Texas Bankruptcy - Bankruptcy Alternatives

At The Law Offices Of R.J.Atkinson,LLC most people who initiate representation or a free initial consultation for Bankruptcy Debt Relief, filing for Bankruptcy often represents the best way to address their financial problems. However it must be noted that Bankruptcy is not the only solution to Debt Relief. There are alternatives to filing for Bankruptcy.

Sometimes people are not eligible for Bankruptcy Relief or it is not in their best interest to file for bankruptcy. Most people file bankruptcy because of a particular motivating factor such as a judgment that has been entered against them or a lawsuit that has been filed against them. Maybe their wages are being garnished, their car is going to be repossessed or their mortgage company has started foreclosure proceedings. Many people file bankruptcy because they think it is their only option to address these kinds of issues which may often be the case.

There are however, alternatives to filing bankruptcy such as defending a lawsuit, objecting to a garnishment and filing a Temporary Restraining Order (TRO), in certain cases regarding a pending foreclosure. These type of alternatives work and can be very productive as alternatives to bankruptcy.

In some cases, Bankruptcy is the best and smartest choice when facing dire financial problems. In other cases, an alternative action, such as an informal negotiation and settlement with creditors or making payments through a credit counseling service, may be sufficient. In still other cases, doing nothing may suffice. By offering experienced, professional advice and an honest appraisal and evaluation of you particular case The Law Offices Of R.J.Atkinson,LLC can help you decide what course is best and help you carry out your decision.

Do Nothing

Surprisingly, the best approach for some people deeply in debt is to take no action at all. If you're living simply, with little income and property, and look forward to a similar life in the future, you may be "judgment proof". This means that anyone who sues you and obtains a court judgment won't be able to collect simply because you don't have anything they can legally take. Remember, except in unusual situations such as a willful failure to pay child support, you cannot be thrown in jail for not paying your debts and, in Texas at least, a creditor cannot take away essentials such as basic clothing, ordinary household furnishings, personal effects, food, Social Security, unemployment or public assistance. So, if you don't anticipate having property a creditor could take, Bankruptcy may not be necessary. However, you will have to deal with the constant barrage of collection efforts and may never completely clear up your credit. We can help you decide if doing nothing is best for you.

Negotiation and Settlement

People or businesses confident that their financial troubles are only temporary may benefit from simply negotiating directly with their creditors. For example, when one is facing a foreclosure or is behind on his or her mortgage, a mortgage holder may rewrite the mortgage so that the past due amount is simply added into the total and amortized over the course of the loan. Sometimes a mortgage company might accept a debtor's deed to the property in lieu of foreclosing and reporting the action to a credit agency. Other creditors may agree to stop their collection efforts and/or accept reduced payments if the debtor signs a "forbearance agreement" promising to pay the debt in full over time. Some creditors may also allow a debtor to pay off the debt for a lump sum reduced amount. Even if creditors may be willing to offer settlements for less than what you owe, you should consult an accountant or tax professional to be certain that you will not owe taxes for the amount of debt written off in a settlement.  Creditors who settle for less may issue a 1099 tax form at the end of the year, which may be required to be added to your tax return as income.

Creditors facing the possibility of a Bankruptcy court discharging their claims are oftentimes more amenable to negotiation. At The Law Offices Of R.J. Atkinson, LLC we may be able to help you negotiate and settle your debts with creditors.

Credit Counseling Services

A Credit Counseling Service helps debtors negotiate payment arrangements with their creditors. The service attempts to convince unsecured creditors to accept less than the full amount of the debt and to reduce or eliminate interest charges and penalty fees. The Service generally collects money from the debtor on a monthly basis and distributes it to the creditors.

Perhaps you may have thought about consumer credit counseling, but this might not be the most viable option for Debt Relief. Credit Counseling is a popular, legal, and ethical alternative to filing bankruptcy. Utilizing this option, a credit counseling service will work with you to develop a payment plan based on your income, and then will work with your creditors to negotiate them to accept these payments to pay off your debts over time. Sometimes these plans can lower or even eliminate interest on unsecured debts. The big problem with these credit counseling plans is that you will still have to pay off all of the debts which can take up to 5 to 7 years and you will probably NOT see a benefit to your credit from doing so. Credit Counseling will often damage your credit worse than Filing for Bankruptcy and burdens you much longer.

Some credit counseling agencies are nothing more than scams. You should be aware that some Credit Counseling agencies are in trouble with the Federal Trade Commission and the Internal Revenue Service for over-promising their clients. Even Credit Counseling agencies approved by the US Trustee's Office and the Bankruptcy Court in your District may not be helpful either, as not all creditors will work with credit counseling agencies. The goal of credit counseling is to help you pay your debts if you are able to do so.  This service works best for people with the ability to pay their debts in full, or at least a great portion of the debt owed. If you choose credit counseling as an option to address your debt you must be able to pay the credit counseling payment without getting behind on your regular living expenses such as your house or car payment for credit counseling to be a really viable option.If you do speak to a credit counseling agency, make certain that they look at your overall financial situation, and that they take into consideration whether or not your budget will take address your family's ongoing needs in addition to the payment to the agency for your debts.  Often agencies only look at the debt payment and will pay little or no attention to your actual ability to pay your other living expenses. 

What if all of your creditors except 2 or 3 agree to work with the Credit Counseling Agency you choose and the 2 or 3 who won't work with them sue you? Interestingly, mortgage companies and other secured creditors usually will not work with credit counseling agencies. There is no law that can force any creditor to accept a credit counseling service payment plan. Bankruptcy can force creditors to accept a payment plan or simply eliminate certain unsecured debts.

Many credit counseling agencies advertise themselves as 'non-profit', but why do you think this means they are free services? Simply because they are non-profit, doesn't mean they are free. Many of our clients who were former credit counseling clients were appalled when out of their $150.00 per month payment, $50.00 was going to the counseling agency. Does that sound like 'non-profit'?

Credit card counseling services, non- profit or otherwise, are usually subsidized in some way by the major credit card companies, banking institutions, and other financial companies. Some believe that "Credit Counseling Services" are merely guised bill collectors. If you choose to use a Credit Counseling Service, or what is known as a "mortgage assistance firm," be sure to ask for three references, find out if your creditors will work with the Service, confirm with the State of Texas, your county or city that the Service is authorized to do business, and check its status with the Attorney General's Office and your local Better Business Bureau. Also check the list of approved credit counseling services for the Bankruptcy Court District in which you reside. You are also well advised to contact an attorney. The Law Offices of R.J. Atkinson, LLC may help you decide if a Credit Counseling Service is right for you.

Debt Work Out Agreements

Debt work out agreements are a combination of Credit Counseling and Debt Settlement. A service or attorney will attempt to lower your debts and allow payments over time, although the debts will be lowered by less than Debt Settlement and the payments are much quicker than Credit Counseling. This can be most useful for people who are expecting money soon such as an inheritance or a large bonus or commission. The Law Offices of R.J.Atkinson,LLC offers this service on an hourly rate or even a commission basis in some circumstances.

Debt Settlement Services

Unlike Credit Counseling, Debt Settlement Services will lower the amount owed on your debts through a negotiation. By doing this, you can pay off your debts at less than the full amount owed. The catch is you will need to come up with the money fairly quickly. This type of service can be useful if you have equity in a home or retirement account that you can part with, but not if you are struggling living pay-check to pay-check.

There are a lot of companies offering Debt Settlement Services, however many services are scams that may take your money and quickly disappear or charge fees so unreasonably high that you might be better off negotiating yourself. Be aware that Debt Settlement, like Credit Counseling, usually hurts your credit just as much as a Bankruptcy filing even though you deplete your assets to pay the debts (as opposed to usually keeping them in a Bankruptcy Filing).

If you reside in Houston, Austin, San Antonio, or Dallas and have questions about the Bankruptcy Alternatives please contact The Law Offices of R.J.Atkinson,LLC at 800-436-9056 for a free initial consultation to discuss your legal options in Bankruptcy. Don't lose everything.


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