Comparing Bankruptcy and Non-Bankruptcy Alternatives
If you have debt problems, it’s important to understand all of the options available to you. At The Law Offices of John E. Mufson in Delray Beach, Florida, we offer a free initial consultation to explain bankruptcy and non-bankruptcy options.
Alternatives to bankruptcy include loan modification and debt consolidation. Basically, these options involve negotiating with your creditors to reduce your debt. Here are some comparisons of bankruptcy and non-bankruptcy options.
| Bankruptcy | Non-bankruptcy Options | |
| Dealing With Creditors | All creditors are forced to accept bankruptcy terms. | You will have to negotiate with each creditors individually. Some creditors may refuse to negotiate. |
| Discharge of Debts | Unsecured Debts are completed eliminated. | A creditor may forgive a debt. However, they are not required to by law. |
| Tax Implications | You are not subject to taxation for discharged debts. | In debt consolidation or loan modification, you are taxed on the amount of debt that is forgiven. |
| Protection of Assets | Bankruptcy includes an automatic stay that protects you from garnishments, repossessions and foreclosure. | Debt consolidation and loan modification offer no protection from adverse creditor actions. |
| Creditor Harassment | Bankruptcy puts an immediate stop to creditor harassment. | Creditors can continue to call you. |
| Effect on your credit | Filing bankruptcy will remain on your credit report for up to 10 years. You can generally restore your credit in about two years after your bankruptcy is discharged. However, filing bankruptcy does not have the stigma it once had. Once you start paying bills, your credit will improve. | Debt consolidation and loan modification still have a very severe impact on your credit. However, if the non-bankruptcy solution doesn’t fix your debt problems, bankruptcy may be your only solution. |