Credit Counseling and Alternative Options to Bankruptcy

Issues with a person’s finances can be incredibly stressful. It’s not uncommon to feel hopeless, as if there is no way to recover from the debts you are struggling to manage. You may have difficulty paying your bills and, as a result, experience constant calls from creditors. It’s essential not to ignore the problem, because it won’t go away until you take action. Credit counseling is a service that offers a variety of benefits and, in some cases, may be able to provide alternative solutions before deciding to file for bankruptcy. In some cases, it may seem as though bankruptcy is the most appropriate option. Before drawing this conclusion, it’s crucial that you first consult with a credit counselor and a bankruptcy lawyer as they can help weigh your options.  


Understanding Credit Counseling

When filing for Chapter 7 bankruptcy, debtors must go through credit counseling at least 180 days before doing so. However, it’s essential to be aware that credit counseling is more than just a necessary task to file for Chapter 7; it’s a service that offers counselors who can advise you on your debts and finances. It may also be a way to come up with an alternative plan for filing for bankruptcy. Benefits of credit counseling include:


  • Developing a debt management plan 
  • Getting expert advice on how to manage your debts
  • Reviewing your credit report
  • Assistance with reducing your debt
  • Helping with lowering interest rates
  • Receiving debt education 


Through credit counseling, you may discover that there are other options available to you. Alternative options to bankruptcy include: 


  • Debt settlement programs
  • Debt consolidation loans
  • Liquidating assets to pay off debts
  • Refinancing your home
  • Finding a way to make more money
  • Reducing your spending


While it may be necessary to file for bankruptcy in some cases, exploring your options will be critical to ensuring that you are making the best possible decision based on your specific situation. 


Choosing Bankruptcy

Despite your efforts to find an alternative option, bankruptcy may be the only way to get out from under the crushing debt you are facing. While the thought of bankruptcy may seem stressful, with an experienced lawyer by your side, you will have a clear picture of your options and will finally have relief from your debts. There are a few different options you can choose from, the most popular are:


  • Chapter 7: This form of bankruptcy allows debtors a clean slate by having many of their debts discharged. Through this process, many assets are liquidated, and proceeds are used to pay as many debts as possible. To qualify, debtors must attend credit counseling and pass a means test. However, be aware that not all debts can be dismissed. Debtors will still be responsible for student loans, child support, back taxes, and more.  
  • Chapter 13: This is known as the “wage earner’s plan” and may be appropriate for those who do not qualify for Chapter 7. In Chapter 13, the debtor develops a repayment plan that will pay back some of your debts over 3-5 years. This can be an attractive option for those who are looking to retain their home. 


These options offer different advantages depending on your situation, which is why consulting with an experienced lawyer may be the most appropriate way to make such critical decisions over your future. 


No one truly wants to file for bankruptcy, but by doing so, you can begin to face your debts, experience relief, and start the process of rebuilding your credit. To discuss your options, and learn more about the advantages and disadvantages of bankruptcy, contact an experienced lawyer, like a Chapter 13 bankruptcy lawyer, today.