If you are faced with a mountain of debt, with creditors literally harassing you each and everyday for payment of their debt, you have probably thought long and hard about filing for bankruptcy protection.  You have probably visited many websites and forums talking about what you can, should, or never do when facing bankruptcy.  Are there really other alternatives if you are already thinking of filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy?

Negotiate With Your Creditors Directly

In this depressed economic time, many banks and creditors hurting financially just like you and I.  They are also struggling to make money because their customers cannot pay as much as they used to.  Talk to the loss mitigation department of your creditors, sincerely explain your situation to them, and try to work out a deal.  If you can just get one or two of these creditors to give you a favorable payment term, then hopefully you have enough money to pay off the loans over time and stave off the bankruptcy route.

Use Legitimate Credit Counseling Programs

No doubt by now you have received many offers for debt consolidation, credit counseling, or debt management programs.  They all work in similar fashion where they will help you assess your financial health, devise a plan for you to pay off the loans, and then help you implement it.  There are many scam credit counseling programs out there, so choose it carefully.  Here are some questions you can ask the credit counseling programs:

1. Where can I get information on your agency and the programs you offer?

If the representative on the phone is just concerned about signing you up as a client, and not answer your questions about the company or the programs, that should raise a red flag to caution you against using them.

2. Do you pay referral fees for new customers?

If the credit counseling program pays the referral fees for new customers, chances are they are more interested in providing people with payment plans (hence a commission) than helping and educating people with their debt problem

3. Can I get status on my account on a regular basis?

You need to be able to track the credit counseling company’s claim that they are working for you.  You want to make sure that they can provide you with a regular reports stating what has been paid to whom and when.

Stop Harassment Of The Creditors

When you owe money to creditors and you are behind in payments, they might try continuously to collect this debt by harassing you day and night.  You do not necessary have to file for bankruptcy to stop the harassment of these creditors.  There are other ways to stop them to harass you without invoking the automatic stay statute of the bankruptcy law.  There are federal and state debt collection laws that can protect you from creditors who are harassing you excessively, or abusing their power to collect money from you.

Please see the follow up to this article for ways you can protect yourself from abusive and harassing creditors.

Tags: Automatic Stay, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Credit Counseling, Debt Consolidation, File For Bankruptcy

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Posted in Why File Bankruptcy by ssanchez 1 Comment