Alternatives to Filing Bankruptcy in Utah
Before you decide if bankruptcy is right for your situation you should consider if there are alternatives to filing bankruptcy in Utah. Here are four alternatives to filing bankruptcy in Utah, however these alternatives are not for everyone:


Do a Work Out with Your Creditors
The first step with this alternative is to contact each of your creditors and ask them to work out a payment agreement of the  debt you owe them. You can try and explain your current financial situation – make sure to be honest about it – and explain why you have not been unable to make payments or why you cannot make payments of the current amount due in the near future. Sometimes you find that a creditors that is willing to cooperate because they want to collect what you owe. The creditor might be willing to reduce payments, extend how long you pay on the debt, or could grant you an extension to make payments.
Downside to this option: This can a grueling process that takes time. Be prepared to spend a lot of time on the phone –usually hours – and be willing to put effort into making this work.  Keep in mind that any settlement with creditors at a lower total amount than you owe can result in taxable income to you pursuant to the IRS rules. For example, if you settle a $8,000 credit card for $3,000 this may result in $5,000 in taxable income. On the other hand, if you file bankruptcy you pay nothing and there is currently no tax on the debt that is discharged or wiped out.

Get a Debt Consolidation Loan
Debt consolidation loans are another option is working with creditors. When you get a debt consolidation loan, you apply for a loan to pay off all your debts. That way, you have a single payment each month. The interest rate on your debt consolidation loan can be less than your interest rates on credit cards, so it might help you save money on those fees.
Downside to this option: You need to have a good to decent credit score to be approved for a debt consolidation loan, especially at an affordable rate. While any loan would help get your payments down to one, a debt consolidation loan with a high interest rate, of 32%, is going to cost you a lot of money in the long run. 

Credit Counseling 
Another alternative to filing bankruptcy might be credit counseling. Your creditors might be willing to accept lower payments and lower your interest rates if you enter a credit counseling or debt repayment plan. In these plans, you usually deposit money into an escrow account with a credit counseling service. This money is then used to pay your creditors based on a repayment schedule set up by your credit counselor. As part of the credit counseling agreement, you will most likely have to agree to not use or apply for any additional credit until the program has been completed.  Downside to this alternative:  Credit counseling has greater risks than a bankruptcy filing. When you file bankruptcy, an automatic stay protects you from legal actions and keeps creditors from repossessing your belongings or garnishing your wages. When you use a credit counseling agency to come up with a payment plan you do not have the benefit of the automatic stay and extra protection that is provided by the court. If you miss a payment while in credit counseling, your creditors can take you to court. Also, you could face the possibility of some creditors working with your credit counseling agency while others will not do so. You will also most likely pay back either a larger portion of your debt or all of it through credit counseling, while with a bankruptcy you would either pay back none or just a small percentage of your debt.

Not Taking Any Action
Another approach that some people take is to do nothing.  Just like is says – don’t do anything and see what happens.  This is not that great of an idea in most cases and you need to really know what your are getting into if you want to seriously entertain this option in your life.   The Downside to this option: If you have no valuable assets or minimal assets and you have very little or no income, you might be classified as “judgment proof.” This means that if you have nothing you can use to repay your creditors, any legal judgments they obtain against you are basically useless. The creditors might end up writing off your debt after a few years, even if you don’t pay anything at all. If your circumstances change or you gain the ability to repay either some or all the debts your creditors might pursue you to get repaid. You can still be harassed by the creditors as they will attempt to collect what they can from you.

As I say in almost all of my blogs the good thing is there are options out there but you need to discuss your particular situation with an experienced bankruptcy lawyer.  Since 2000 people living in Utah have trusted the Utah Bankruptcy Guy to help them with their bankruptcy needs.  Call today to set up a free consultation. #utahbkguy

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What are the altenatives to bankruptcy?

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