Bankruptcy is perhaps the severest means of dealing with overwhelming debt. Consumers, whose outstanding debts have become virtually unmanageable, oftentimes look to insolvency to end debt collector harassment and also the anxiety related to dealing with the indebtedness. That being said, there are actually alternative solutions that also offer means of dealing with consumer debt, yet without the far reaching consequences a bankruptcy entails.
Informal Debt Agreement Alternatives: Enlisting the Help of a Debt Counselor
Consumers should think long and hard before resorting to bankruptcy protection for debt relief. Although radical in its debt eradication, the consequences are far reaching. Informal debt agreement alternatives include the services of a debt counselor. Much like creditors have debt collectors aiding them in seeking repayment of a debt, debtors have debt counselors assisting them with the nuts and bolts of credit management.
In some cases these debt counselors may help with drafting a budget, assist consumers to understand their legal rights, and also provide support to them when dealing with creditors. Debt counselors may actually even take over some of the negotiations with creditors’ agents, providing consumers some much needed relief from the attentions of debt collectors.
Debt that is simply too plentiful for a structured but still informal debt settlement may require the path of bankruptcy; it is noteworthy that even before opting for a formal bankruptcy filing, there are still other options available.
One example is the binding debt agreement. In many ways it mimics the informal negotiations that may be undertaken with the help of a debt counselor, but in addition to providing a settled amount for satisfying the debt it also offers legal protection to the consumer.
If this solution does not meet the consumer’s needs, there is the personal insolvency agreement; it is a final alternative prior to filing for bankruptcy. There are no limitations on the incomes, assets, or debts involved, and it may entail a lump sum settlement to an array of creditors, and even various asset liquidations that are then used for meeting the outstanding balances due.
Only when informal as well as formal means of debt settlement are exhausted, bankruptcy should be a viable option.