Alternatives to Bankruptcy
Learn what you can do instead of filing for Chapter 7 or Chapter 13 bankruptcy.
In many situations, filing for bankruptcy is the best remedy for debt problems. In others, however, another course of action makes more sense. This article outlines your main alternatives.
Do Nothing
Surprisingly, the best approach for some people deeply in debt is to take no action at all. If you're living simply, with little income and property, and look forward to a similar life in the future, you may be what's known as "judgment proof." This means that anyone who sues you and obtains a court judgment won't be able to collect from you simply because you don't have anything they can legally take. (As a famous song of the 1970s said, "freedom's just another word for nothing left to lose.")
Except in unusual situations (being a tax protester or willfully failing to pay child support) you can't be thrown in jail for not paying your debts. Nor can a creditor take away such essentials as basic clothing, ordinary household furnishings, personal effects, food, or Social Security, unemployment, or public assistance benefits.
So, if you don't anticipate having a steady income or property a creditor could grab, bankruptcy is probably not necessary. Your creditors probably won't sue you, because it's unlikely they could collect the judgment. Instead, they'll simply write off your debt and treat it as a deductible business loss for income tax purposes. In several years, the debt will become legally uncollectible. And in seven years, the debt will come off your credit record.
Stop Harassment from Creditors
If your main concern is that creditors are harassing you, bankruptcy is not necessarily the best way to stop the abuse. You can hang on to your bankruptcy option but still get creditors off your back by taking advantage of federal and state debt collection laws that protect you from abusive and harassing debt collector conduct. See What to Do If a Bill Collector Crosses the Line for more information.
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