I am not one to discourage people from seeking alternatives to filing bankruptcy, but most of the “alternatives” are not all they are cracked up to be. Advertisements and articles are popping up everywhere offering alternatives to bankruptcy, and the only thing I can say to that is if it is so easy to fix financial problems, why are so many people in such bad financial situations?
Bankruptcy seems to be getting a bum rap from many of the individuals and companies that are pushing their “solutions”. They make misleading and false claims such as: (i) if you file bankruptcy, your credit is ruined for 10 years, (ii) if you file bankruptcy, you will never ever get a credit card or loan again, and/or (iii) their solution is easier and/or cheaper than bankruptcy. These claims are simply untrue in most all cases.
Some even try to guilt people into using their services by claiming that filing bankruptcy is taking the easy way out. I assure you that filing bankruptcy is far from taking the easy way out for most people – it involves an upheaval of people’s lives financially and emotionally. But that being said, it can provide much needed relief.
Those pushing alternatives to bankruptcy are trying to sell and make money, and like some “salespeople”, they make promises that are just flat out untrue, misleading, and are not in the best interests of consumers. There really is no secret solution that will wipe out your debts for pennies. I agree with what Cathy Moran, a bankruptcy attorney in California, says in her article on Bankruptcy Law Network, “[t]here are no painless, quick fixes.” You can read what she has surmised about debt settlement companies here. I wish I could sell a silver bullet that would take everyone’s financial pain away.
Rarely do all the cards fall into place for debtors to solve all their debt problems by utilizing the recent heavily-marketed alternative solutions. Often debtors regret the money and time they spent seeking the alternatives, because they could have used the relief that bankruptcy provides much sooner.
As Ms. Moran eloquently concludes in her article, “Bankruptcy works because it binds all creditors with a few exceptions: support, recent taxes, student loans. It is enforced by the power of a federal judge. It generates no tax consequences. It is resolved in a finite period of time…Most clients need relief from the stress that debt brings with it. They need to save for retirement. They need to create an emergency fund. They need these things NOW. Bankruptcy does that. No secrets; no magic.”