A lot of people ask me if there is anything else besides bankruptcy. Well, the answer is yes, which might surprise you. There are many alternatives to filing for bankruptcy, but not all of them work for everyone. It is important to look at each option carefully before making a choice. This will help the debtor figure out which way will work best for them. Some of the alternatives to bankruptcy may put the debtor in a more dangerous situation, while others may just make the pain last longer. There are a few ways to solve this, which we'll look at below.
Debt Settlement
Many people who owe money use debt settlement, but in the end, they have to file for bankruptcy. In some cases, this is a good alternative to filing for bankruptcy. However, many studies have shown that many people who use this method will still end up filing for bankruptcy at some point.
Debt settlements have some hidden parts that very few people know about. The Internal Revenue Service (IRS) can actually tax the amount of the debt settlement because it is considered a form of income. By law, every creditor has to tell the IRS how much debt has been paid off. The lender will send you a form called a 1099, which you need to fill out and send in with your taxes. If you settle with a lender and pay off $1000 worth of debt, the IRS sees this as a form of income and will add it to your taxable income. For more information on Bankruptcy Attorney, go to http://www.filingpersonalbankruptcyhelp.com/Bankruptcy Attorney/.
Consolidate your debts
This is the most common alternative to filing for bankruptcy. It's basically another loan that pays off all of your other loans. When you get a consolidation loan, there could also be things going on behind the scenes. When choosing a consolidation loan, you need to be careful because some of them are hard to understand. You need to make sure that this new loan is cheaper than the one you already have.
Most of the time, these consolidation loans work by spreading out the same amount of money over a longer time period. This gives the impression that you pay less each month, which is true. But in the long run, you will pay back a lot more interest than you would have to your original lender. Too many loans to pay off debt include a balloon payment at the end. This is very inconvenient as the debter will have to find a large sum of money all in one go, it could well be that the lender will have to take out another loan to finance this baloon payment.
