Alternatives to Filing for Chapter 7 or Chapter 13 Bankruptcy

  • By:David Bate

Filing for Chapter 7 or Chapter 13 bankruptcy is one option to resolve your debt; however, there are factors to bare in mind when you do so. For instance you may not be able to take out a loan for a period of time, you may hold up any extra money while you pay off your debt, and you may lose your assets. If you are looking for alternatives to filing for bankruptcy, the following are some possible options:

Debt Consolidation

An alternative to bankruptcy is to combine your debt. This can be done in a few different ways such as:

  • Take out a debt consolidation loan – This loan combines all of your debt into one loan. You will still owe the same amount of debt; however, the monthly payments and interest rate may be lower than the seperate payments.
  • Transfer your debt into a credit card – Select credit card companies will allow new customers to transfer rates onto a card at a low interest rate. Within the terms, the interest rate may stay the same until your debt is paid off. The advantages of this option are similar to a consolidation loan and can be further explained by a bankruptcy lawyer.
  • Consolidate your debt with home equity – If you own a home and have equity in it, you may be able to take a home equity loan out. This consolidate your debt into one loan that has low interest and may be tax deductible. Keep in mind that you don’t want to default on this kind of loan as it could result in a repossession of the property.

Negotiate with Creditors

If creditors continue to seek money from you, it might be a good idea to ask them to agree to a repayment plan. Often they will only agree to this when they know that bankruptcy is the alternative.If they consent, the monthly payment or interest rate may be reduced.

Develop a Debt Management Plan

If you try and negotiate with a credit agency, you might find the task to be very difficult. In this case you can talk with a credit counseling agency who may help you to develop a debt management plan. This includes a repayment plan that is based upon your disposable income and total debt. The agency will then approach the creditors and ask them to agree. If they do, you will make a monthly payment to the agency, for a small fee, and they will disburse the money to the right place.

There are some notable disadvantages to using these companies as many are paid for by creditors. Furthermore if you miss a payment, any creditor may have the right to terminate the plan. Whereas, if you miss a payment under a Ch. 13 bankruptcy, you are protected from being pursued by the creditors. Furthermore, you may only pay a portion of your debt to the creditors with Chapter 13 bankruptcy. On the downside of filing for Ch. 13, your credit record can be affected as long as ten years.


If you don’t own any valuables, or have a lot of income, you could choose to stop making payments to creditors. They can make an attempt to collect the debt, but it has to be done with the Fair Debt Collection Practices Act in mind as well as any laws. For example, they cannot call you throughout the day, lie to you to collect money, call at the wrong time, or use abusive language. It is possible for a creditor to take you to court, but if you have no assets they likely will not get the judgement they are seeking.

Have Your Bankruptcy or Debt Related Questions Asked During a Consultation with a Skilled Lawyer

If you are concerned about filing for bankruptcy, are unsure if you qualify, or are considering alternatives, you may benefit from consulting with a chapter 13 bankruptcy lawyer Memphis, TN trusts. Your lawyer will let you know what options are available and guide you through the process of filing for bankruptcy or an alternative.



Thank you to our friends and contributors at Darrell Castle & Associates, PLLC for their knowledge about bankruptcy law.  

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