Debt Relief Solutions: Legal Options

Whenever you are in a financial crisis and face a debt management problem, you should be aware of the legal options available for debt relief; bankruptcy should not be your first debt relief solution for your debt problems. It is actually the last course of action taken due to the compulsion of creditors.

Management and Counseling

Get an insight into various options and solutions available for your financial problems by approaching credit counselors. The counselor will analyze your income resources and debt liabilities, and then have a discussion with your group of creditors. After this, he/she will hand over a debt management plan, which you have to sign and agree to pay the debts to creditors in partial payments periodically. This is known as debt consolidation agreement. Creditors will also agree to stop any legal or collection action against you until you stick to this debts consolidation agreement. In few cases, these counselors additionally act as the debtor agent.

Mutual Agreement

You can have discussions with your creditor(s) and negotiate to change your repayment terms. It might be difficult to be achieved, but you can obtain when you are able to give confidence to your creditors of your sincerity to pay back the debts. Under this mutual understanding, you can rearrange your funds to pay back your debts, possibly with more number of installments.

Bankruptcy

Still if you find issues with your debts and find it difficult to repay your creditors, you may think of bankruptcy filing. Bankruptcy can be filed in the federal court against you by the creditors when they feel that you will not be left with any assets to pay their debts. However, you should try to avoid such a bad situation because the after effects of bankruptcy can haunt you for a long period (up to 10 years). After filing bankruptcy, it will be nearly impossible to obtain loan at the normal rate of interest. If you feel that bankruptcy is the only way, then decide which chapter of bankruptcy you want to file. In Chapter 7 bankruptcy, the federal court will liquidate all your assets (certain personal assets are exempted and left with you) and use the fund generated by this liquidation for repaying the creditors. Under Chapter 13, you will agree to a federal court sanctioned debt management plan for a period of 3 to 5 years to pay back all your debts.

Get Legal Help

It is wise to get legal assistance of attorneys and debt relief counselors before you choose the option for getting relief from your debts.