Alternatives to Bankruptcy

Having lots of debt is like having an elephant sit on your chest. You might be able to breathe for a while, but eventually the weight becomes too much. Bankruptcy pulls that elephant off your chest. 

No, for some people bankruptcy is not right for them. Bankruptcy generally washes away consumer debts. That does not include student loans, many taxes, and child support obligations. If your debt is mostly one of those items, filing for bankruptcy will do you no good. 

However, most people have debt from many sources. That's why it's important to talk about your options with an experienced Bankruptcy Lawyer. Since bankruptcy won't help everyone, a good bankruptcy lawyer will be honest and tell a potential client that bankruptcy isn't their best option.

Debtors who have transferred property within two years of when they want to file are going to have problems during the bankruptcy. This is especially true if you sold or transferred property for the purpose of preventing a creditor from accessing it. This is called a fraudulent transfer or fraudulent conveyance. It could also be a problem if you transferred it for less than its worth and you were insolvent when you did so. This type of fraudulent transfer would also be problematic during the bankruptcy.

Some people our attorneys talk to don't want to file bankruptcy because of concerns about their credit report. What people don't understand is that if you are considering bankruptcy, your credit is likely already in the tank. Yes, a bankruptcy stays on your credit report for seven years, but many of our clients are able to build back their credit quickly after the bankruptcy by making smart financial decisions.

In a very small amount of cases, a debtor has so few assets there is literally no point in filing the bankruptcy. These people are usually on government assistance, are elderly, have no prospect of working in the near future, and have less than $2,500 in their bank account.

They probably do not own property and if they do, it has less than $125,000 in equity ($500,000 if there is a homestead declaration). People like this have no wages to garnish, no bank to attach to, and no home equity to grab. As such, these folks are in a sense “judgment proof,” because there is nothing for the creditor to put a lien on or seize.

If a client falls into one of those categories, a bankruptcy attorney may suggest they do not file for bankruptcy. The reality is that most sophisticated creditors will be able to get a judgment against you at some point. Most credit card companies and banks will sue within a year of not receiving payments. They file cases like this all the time and are experts in what they have to prove to get the judgment against you.

What does that mean for you? It means they are not going away any time soon. A judgment lasts for 20 years in Massachusetts and New Hampshire. That is a lot of time for a creditor to keep hauling you back to court for wage and bank attachments.

You generally have three options: 

• Enter a Payment Plan: ask for mercy from the court. Debt collectors will call and claim that you have to pay the whole debt now. That is not always the truth. They usually have wiggle room to enter into a payment plan with you. Will they accept $30 a month? Probably not. But if you are willing to provide them with a financial statement, they might give you a lower payment plan. The problem with this route is that in providing a financial statement to them, they now know all your assets and can use that to decide what to attach to if you miss a payment.
• Try for a Lump Sum Settlement: Debt collectors will usually take a big fraction of the debt off if you are willing to make one or two large lump sum payments. The problem with this route is that you might have to borrow money from a family member or worse, from another bank to get enough cash for the lump settlement.
• Ask for Mercy From the Court: If a creditor has a judgment against you, their attorney likely has asked the court for a payment review hearing. At this hearing you will have to complete a financial statement disclosing all your assets and income. The court might be sympathetic to your case and only issue a small payment plan. However, this will not stop the debt collectors from trying to attach to your house or bank accounts without your notice.

Lastly, there are companies that claim they can restructure or consolidate your debt if you just make monthly payments to them. Unfortunately, in our experience, these companies do not actually help the debtor get out of debt and only make things worse.

Bankruptcy is not right for everyone, but if you have a lot of debt, the options are scarce. You need someone who knows the debt collection companies and the tactics they use to try to get money from you. At Marcotte Law Firm, we have specialized Lowell attorneys who know just that.

Give the Lowell Bankruptcy Lawyers a call today for a free consultation, (978) 458-1229.