Bankruptcy isn’t right for everyone. Maybe you’ve decided that it isn’t right for you or maybe you don’t qualify to file for Chapter 7 or Chapter 13 bankruptcy. There are several alternatives to bankruptcy in Oklahoma that may better suit your needs. In this article, you’ll learn more about how to possibly avoid bankruptcy by using at least one of the alternatives to bankruptcy in Oklahoma. If you have questions about Chapter 7 cases or how to avoid bankruptcy after you read this article, schedule a free consultation with the Law Offices of B. David Sisson.
How Bankruptcy Works
Before we discuss alternatives to bankruptcy in Oklahoma, let’s briefly discuss how bankruptcy works. When bankruptcy cases are filed with the bankruptcy court with the filing fee, the debtors receive what is known as an automatic stay. An automatic stay stops creditors from attempting to collect on debts. This includes wage garnishments, collection calls, and civil lawsuits for collections, just to name a few. The debtors can claim the exempt property in Chapter 7 cases.
The debtors must attend a 341 meeting. This meeting is also known as the meeting of creditors. While creditors may attend to question debtors, they often do not attend. In Chapter 7 cases, exempt property is property debtors keep. Any property that is not considered exempt is sold by the trustee to pay creditors at least some of what is owed by the individual debtor.
Eventually, the debtors receive a clean financial start because of their discharged debts. However, bankruptcy does impact their credit. They may pay a higher interest rate on a car loan or have a difficult time obtaining a credit card while they rebuild their credit. As a result, some individual debtors decide they would rather avoid bankruptcy and seek alternatives to get out and stay out of debt.
Changing Your Lifestyle: Giving Up Credit Cards
Depending on the amount of debt you’re carrying, one of the first alternatives to bankruptcy to consider is to change your lifestyle and give up your credit cards if you have them and use them. While credit cards do provide convenience and often come with attractive introductory interest rates, missing a payment or even a single late payment can mean that you lose the lower interest and begin accumulating more debt. If you’re unable to pay your credit cards, they go into collections, usually after 60 days. The company may sell off the debt to a debt buyer. It gets reported to your credit (and may even show up more than once). You could get sued.
To avoid this, establish a budget that includes paying down the balances of your credit cards and that also includes paying cash for all of your expenses.
Change your lifestyle and do not rely on your credit cards to pay regular expenses. If necessary, sell assets you no longer want or use.
Find a part-time job to help bring in extra income. Close credit card accounts you shouldn’t use and begin to pay off those accounts. Closing the cards will make it impossible for you to use the card and increase your debt load.
Negotiate What You Owe
Another great alternative to bankruptcy in Oklahoma is to contact your creditors and work with them to establish a different payment plan you can afford or a lump sum settlement. Most creditors recognize that if an individual debtor files a Chapter 7 case they face the possibility of getting absolutely nothing. Most would rather work with people who owe them money or settle with them than risk getting nothing.
If you decide to work toward a lump sum settlement, make sure that you get the settlement agreement in writing. You should also send them a certified check or money order for the amount. Do not ever give creditors access to your bank account. Keep a copy of the settlement agreement as well as a copy of the certified check or money order made out to the creditor. This can be beneficial if the debt is inadvertently sold off to a debt buyer and you must prove that you paid it off.
Seek Qualified Credit Counseling
As an alternative to bankruptcy, credit counseling is fantastic because you’ll work with a professional credit counselor who helps you create a debt management plan. It’s similar to creating a Chapter 13 repayment plan except that you’re not filing for bankruptcy. You could even qualify for a lower interest rate from some of your creditors.
The credit counseling agency works on your behalf to negotiate with your creditors to reduce your payments. Your debts are consolidated. This option is even available for those who have bad credit. It is important to keep in mind that while credit counseling is a good option for credit card debt, medical bills, and other types of consumer loans, it does not help with student loans or past due taxes. You are also required to repay your debts in full.
Debt Consolidation Loan
A debt consolidation loan allows you to take out a loan for the purpose of paying off all of your existing debt. Then, instead of making multiple payments, you only make one loan payment. Generally, a debt consolidation loan is a type of equity loan available to homeowners. If you have good credit and depending on how much debt you have, you might qualify for a personal loan at a lower interest rate that would work in the same fashion. However, it would be important to make sure that you can maintain your debt consolidation or personal loan payment.
Learn More About Alternatives to Bankruptcy in Oklahoma
If you have questions about alternatives to bankruptcy in Oklahoma or if you have questions about filing for Chapter 7 or Chapter 13 bankruptcy, the Law Offices of B. David Sisson are here to help. For more than 30 years, Attorney Sisson has helped clients regain control of their financial future. To learn how we can help you, schedule your free consultation.