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Thinking what options are besides bankruptcy are available for resolving your debts?
Use this handy chart to compare alternatives

CHAPTER 7• Below median debtors with at least $8-10,000 in dischargeable debt (typically credit cards, medical bills, utilities)
•Above median debtors who can beat the means test
• 2-3 weeks prepetition preparation, longer if debtor needs time to pay a fee

• Can be done more quickly in cases of emergency

• Once filed, Court process takes about 90 days

* For a quote, complete the 60-second questionnaire.

• We can usually match any other attorney’s fee

• Quick fresh start
• Stop garnishment, levy, and avoid 1099 (tax document) for canceled debt
Loss of nonexempt assets (which only happens about 5% of cases, and can be minimized or avoided with good legal advice)• Reset at about a 600 score within a year
• Get a mortgage in 2-3 years
CHAPTER 13• Stop sheriff’s sale and cure arrears
• Above median debtors who cannot beat the means test
• Pay off priority debts
• Wipeout marital obligation (other than support)
• Debtors with nonexempt assets that they want to keep
• Debtors with prior chapter 7 within last 8 years, but more than 4 years
3-5 years• Starts at $2,900 plus fees
• Minimum of $500 down
Fees don’t need to be paid in full prior to filingIt takes 3-5 years to start rebuilding credit• Similar to chapter 7, with the caveat that it is difficult, though not illegal or impossible, to procure credit while in the 13
• And you really don’t start rebuilding until you’re done.
DEBT SETTLEMENT (BANKRUPTCY ALTERNATIVE)• Debtors with 1-2 major debts, perhaps disputed
• Debtors with reasons not to file 7, such as nonexempt assets or too much income
2-3 months. We typically start with the biggest ones first. The general rule is that old debts settle for 50 cents on the dollar$500-$1,000 for one creditor, less for additional creditorsCan sometimes avoid bankruptcy• To settle, you still have to pay the creditors
• Can exceed the cost of bankruptcy
• It’s not always successful
• You can get 1099’d for forgiven debt
Will still affect credit about the same as bankruptcy
LETTERS TO CREDITORS (BANKRUPTCY ALTERNATIVE)Debtors on social securityIt takes about 6-12 months for calls & bills to stop$750 for the first 90 days, then, at client’s option, $375 per 90 days thereafter• Less expensive than bankruptcy
• Sometimes referred to a “poor person’s bankruptcy”
• No paperwork to fill out
• No court to appear at
• Not as effective as bankruptcy.
• Creditors can sue, try to levy bank accounts
• Creditors can send 1099s
• Judgment Creditors can get an order to disclose assets, and a warrant if the debtor fails to abide.
• 7-10 years
• The idea is that the debtor will not likely have much need for good credit
• People who have been convinced that bankruptcy is a bad thing
• See also debt settlement above
• Can take 5 years
• Typically implode after about two years
• Can cost thousands
• Fees paid first
• Additional fees upon settlement
Good question• Creditors can still sue you and get a judgment enabling garnishment of wages and/or bank levy
• You can get 1099’d.
• Operators of these services are often not licensed in the State of Minnesota
Even if successful, you won’t start to rebuild until you are all done
NON-PROFIT CREDIT COUNSELING (FAMILY MEANS, LUTHERAN SOCIAL SERVICES)People with high income (or nonexempt assets) who can’t file chapter 7, and would likely have to pay all their debts in full in chapter 135 yearsNominal, just pay the debts back• They will handle calls from your creditors
• They can be successful in getting creditors to waive or substantially reduce interest
• They will also honestly tell you if you really belong in bankruptcy, unlike a for-profit debt resolution service
• It takes five years to rebuild
• You still pay the debts back
Some creditors may drop out
• Your credit will be bad for several years since the creditors are reducing interest
• You won’t really start rebuilding until you are done
DEBT CONSOLIDATIONPeople with good credit and nominal debt or high incomeAs long as it can be done, e.g. a second mortgage can be a 30-year noteBasically nothing – you are paying the debt, hopefully with less interest.• Can preserve credit
• Can lower interest
• It takes a bite out of cash flow, especially if done by way of a 401k loan.
• Additional payments can be a stressor on the budget
• If the consolidation loan was taken out with help from relatives, that can cause preference if a bankruptcy becomes necessary
Possibly not applicable
DO NOTHING• Debtors on social security
• Procrastinators
• Self-employed debtors with few assets who can live on cash, and are hard to collect against.
Endless, until you do something about itNothing, until you do something about it, or start getting garnished and levied, charged bank feesIt’s easy, you don’t need to do anything.
It’s possible that creditors will give up and let the statute of limitations pass(typically six years) without using, then the debt goes away
Eventually creditors will get judgments, garnish wages, levy bank accountsYou will wallow in bad credit until you act to move forward

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