Three Not So Easy Alternatives To Bankruptcy

Due to misconceptions about the benefits of bankruptcy, many debtors spend an inordinate about of time and money trying to avoid a necessary bankruptcy filing. We even have entire industries built upon the idea that “anything” is better than bankruptcy. But the truth is that many of the bankruptcy alternatives proposed by bankruptcy opponents are not so easy for the debtor and may even worsen their financial condition.

Let’s take a look at a few of the facts:

  1. Some bankruptcy opponents suggest that deeply indebted individuals ignore their debts especially if they are unemployed.  “You’re judgment proof!” they say; but what they don’t say is that just because you are unemployed and broke doesn’t mean that creditors can’t get a judgment.  Creditors can and do get judgments and then they wait. Creditors wait until you finally find your job and start putting money in your bank account and that’s when they use that judgment to garnish your wages and seize the money in your bank account. Not so easy after all, right?
  2. Other bankruptcy opponents suggest that debtors fight debt with more debt. Debt consolidation loans are becoming even more popular with the recession because so many have bought into the idea that debt can cure debt. But what they don’t tell debtors trying to avoid bankruptcy is that debt consolidation loans are costly. Oftentimes debt consolidation loans balloon the price of the original debt costing the debtor even more money over time.
  3. Finally, for those who believe that bankruptcy is a “cop-out” they suggest that debtors look to debt settlement. You know the commercials – “settle your debts for pennies on the dollar.” Well for all of those debtors who have ended up filing an emergency bankruptcy after falling into the clutches of a shady debt consolidation firm, debt settlement turned out to be the hard way, not the easy way. Many of these firms charge high upfront fees and fail to deliver much of anything for the money debtors spend.