Houston Law Firm Provides Alternatives to Bankruptcy
Texas attorneys identify the options for dealing with your debts
The attorneys at the Law Office of David A. Fernandez, P.C. know how traumatic struggling with debt can be. While bankruptcy may seem like the answer to your financial problems, it is not the only option. Our bankruptcy alternatives attorneys evaluate your financial situation and explore other possibilities. After considering all of your options, you may determine that bankruptcy is not the right course of action for you.
What are the alternatives to bankruptcy?
The decision to file a Chapter 7 bankruptcy petition is a serious one and should not be made without the advice of an experienced attorney. At first glance, it may seem like a court-ordered discharge of your debts is the simplest and quickest solution, but bankruptcy will affect your credit rating and ability to borrow money for years to come. Bankruptcy is a good option for those who need it, but it should be considered as a last resort. Other debt relief options include:
Debt consolidation — This option is available for unsecured debts, such as the unpaid balance on credit cards, credit lines and unsecured personal loans.
The potential benefits of debt consolidation include:
- Combining most, if not all, of your unsecured debt into one monthly payment, thus enabling you to organize and understand your financial responsibilities each month
- Lowering your total overall monthly cash outflow
- Potentially reducing the interest rates you are paying on the individual accounts
- Removing penalties and reducing finance charges
- Extending the time limit for paying the accounts in full
The possible disadvantages of debt consolidation include:
- Paying a higher interest rate on the consolidated loan than on the individual accounts
- Having to use your home or other assets as collateral
- Causing you to assume more debt because, while a consolidation loan pays off your existing debt, it makes some people feel free to assume new financial obligations
The bankruptcy alternatives attorneys at the Law Office of David A. Fernandez carefully review your case, taking into consideration your present situation and your future.
Debt reorganization — Sometimes referred to as debt restructuring, debt reorganization involves negotiating new arrangements with your creditors for paying your existing debt. This is similar to the debt reorganization process that occurs in a Chapter 13 bankruptcy, except without the involvement of the court system. Private debt reorganization may include debt forgiveness, rescheduling and refinancing.
Advantages of private debt reorganization include:
- Reducing the amount of the monthly payments on your current obligations
- Deferring the payments to a later date, thereby reducing your current monthly financial obligations
- Avoiding foreclosure on your home
- Achieving a discharge of debts
The disadvantages of a Chapter 13 reorganization are:
- A record of the bankruptcy on your credit report for up to 10 years
- The inability to obtain any other debt without the permission of the court while the Chapter 13 case is pending
- The inability to obtain loans because of the unwillingness of potential creditors to lend you money knowing that you have previously discharged debts through Chapter 13
The attorneys at the Law Office of David A. Fernandez can determine whether a Chapter 13 bankruptcy or one its alternatives is the best course of action for relieving your debt problems and building your future financial stability.
Debt negotiation and settlement — When you have income or assets available, you may be able to negotiate a plan for payment of the debt. Because negotiating with impatient creditors can be daunting, you need an attorney to protect your rights. The advantages of debt negotiation and settlement include:
- Buying you time to get back to a financially stable position
- Reducing the total amount of the principal on loans
- Lowering the amount of interest, fees and penalties
- Avoiding a bankruptcy on your credit record
As with the other options, there are some disadvantages to debt negotiation and settlement, including:
- Exhausting your available cash reserves and savings
- Returning to the mindset that you can assume more debt since your old debt is paid off or being paid
- Risking legal action by creditors with whom you do not negotiate a settlement
The attorneys at the Law Office of David A. Fernandez are experienced in assisting clients through bankruptcy and its many alternatives. Whether it turns out that negotiation and settlement or some other option is best for you, you can rest assured that we have thoroughly considered all of the alternatives with your best interests in mind.
Loan modification — In a loan modification, the parties agree to change one or more of the terms of the original loan. A modification may allow the loan to be reinstated after a default, or it might reduce the monthly payments to a level that you can afford.
The benefits of a loan modification include:
- Protecting assets that might otherwise be lost through foreclosure
- Temporarily relieving what might be merely a short-term financial crisis
- Freeing up money that can be used to pay debts
The major downsides of loan modification include:
- Extending the debt obligation for a longer period than under the original terms of the loan
- Delaying the inevitable, when there is little hope that your financial situation will improve any time soon
Credit counseling — Reputable consumer credit counseling agencies work with you and your creditors to develop a plan to pay off your debts. You deposit money once or twice a month into a designated account, usually for three to five years, and the credit counseling agency uses that money to pay your creditors in accord with the terms of the plan. The major advantage of working with a credit counseling agency is that your credit record will not show a bankruptcy. The biggest risk, however, is that the credit counseling agency will prove to be unreliable or disreputable.
Signs of trouble include when the agency:
- Fails to pay creditors on time or at all
- Makes promises it doesn’t keep
- Hides charges or takes them out of deposits that were designated for creditors
- Charges unreasonably high fees
- Misrepresents that it is a nonprofit organization
When you hire the bankruptcy alternatives attorneys at the Law Office of David A. Fernandez, we help you choose the best option for resolving your financial problems. We provide referrals only to reputable nonprofit credit counseling agencies, if that is the best alternative for you.
Contact our attorneys today and get one step closer to debt relief
Call the Law Office of David A. Fernandez, P.C. at 713-893-3244 or contact us online to schedule your free 15-minute telephone consultation. Debt relief is easier than you might think. Call us, and you’ll be one step closer to financial stability.