Debt Elimination Without Bankruptcy

Alternatives for debt elimination without bankruptcy or discharge

The strong preference for debt elimination without bankruptcy lead to the development of a thriving industry. Both law firms and commercial services offer a wide range of financial products and services all of which are designed to eliminate debts completely or rapidly pay off debts for pennies on the dollar. In general, most elimination techniques presume a degree of financial difficulty that should be recognized and discussed when considering any option. The most prevalent alternatives today include the following:

  • negotiating discounts privately - typically with the assistance of an attorney who presents legal options to creditors in light of a debtor's current financial condition.
  • credit counseling and standardized discounts - typically results in substantial reductions in interest rates with no reduction of principal or late fees accrued to date.
  • agreed settlement for partial satisfaction - frequently requires payment of half of all principal and interest owed in exchange for a full release of all debt.
  • consolidation loans - using home equity to pay off existing high interest rate loans, and extend payments over additional years.
  • contesting liability of individual debts in suits - when the legality of debts are in question, or the total amount owed is in question, this option targets individual debts.

Cost-Benefit Analysis

Finding the best solution to a difficult challenge must include an evaluation of the benefits received for a given cost. Certainly, other intangible factors impact satisfaction and peace of mind (i.e. reputation, commitment and personal values), yet the financial impact upon net worth must also be fully understood to arrive at an intelligent decision. Consider 5 years as a medium term measure, in which the impact of all options are compared. With this consistent measure, and the expected result known, only then consider selecting your best option.

See also: