Filing for bankruptcy is the best remedy for many debt problems. However, there are other strategic reasons why a borrower may want to avoid bankruptcy. Consider:
- Bankruptcies, like all court proceedings, are public records and some borrowers may want to avoid having their financial statements open to the public.
- A borrower in bankruptcy loses a significant amount of financial independence. Chapter 7 requires that the borrower hand over all non-exempt assets while Chapter 13 bankruptcy entails a court trustee making financial decisions for the borrower for the next few years. Although the loss of financial freedom is often a necessary step, some borrowers may not be in a position to have someone else tell them how to spend their money or dispose of their property.
- Some courses of action may be better in certain situations, allowing you to avoid bankruptcy completely. One benefit of hiring a bankruptcy attorney is that doing so might actually help keep you out of bankruptcy court.
An experienced attorney will have a better sense of the proper course of action in a given situation than the average person would. For example, many people file bankruptcy just to get their creditors off of the back. However, laws have been passed to stop excessive harassment from bill collectors – a good lawyer can help get you protection from aggressive creditors.
What Options Do Borrowers Have Other than Going to Bankruptcy Court?
Another option is to negotiate with your creditors. Creditors do not want you filing for bankruptcy, since they would then lose any control over the situation. As a result, many creditors are willing to settle your debts for less than you owe to help you avoid bankruptcy.
If a borrower is faced with foreclosure, the borrower can refinance the mortgage. Borrowers can negotiate for a lower monthly mortgage in exchange for a longer payment period. Also, it may be in your best interests to simply do nothing. If you do not have any assets to speak of, you are "judgment proof."
Note that creditors will not be able to collect anything from you, since you do not have anything that they can legally take (there are laws which exempt certain possessions from being seized). This can save you the time and expense of filing for bankruptcy.
What Are Bad Reasons to Avoid Bankruptcy Court?
Many borrowers choose to not go to bankruptcy court even though bankruptcy is clearly the best remedy because the borrower is ashamed of declaring bankruptcy. Although there are many valid reasons to avoid bankruptcy court, shame and pride should not be the primary reason. The point of bankruptcy is to give the borrower a second chance; borrowers should not be afraid to ask for that chance if they truly need it.
Seeking Legal Help
If you believe you may need to file for bankruptcy, you should speak with an experienced bankruptcy attorney. An attorney will help you understand your options and will offer advice for whether or not you should file for bankruptcy.