Letter to Creditor, Bankruptcy Alternative

Using a letter to creditor as a bankruptcy alternative resolution

Negotiating tactics for agreed discounts and reductions generally fall into three broad categories: 1) reducing principal, 2) reducing future interest charges, and 3) altering original terms. Depending upon individual circumstances, one or all of these changes may be included in any particular agreement. In the most dire situations in which Chapter 7 is eminent, creditors become quite generous when encouraged by an offer of additional collateral. Using a letter to a creditor as a bankruptcy alternative should not threaten Chapter 7, but rather implicitly highlight circumstances that suggest Chapter 7 is the only viable option.

Drafting a letter to a creditor

Motivation is the key to success for all offers, so long as the motivation is reasonable, legal, and can be performed immediately. All of these factors relate to credibility and the basis upon which a creditor may benefit. Creditors tend to evaluate current situations rather than initial expectations, so factual data, sworn statements, affidavits, and the participation of an attorney all bolster credibility. When compared to a dire situation today that may result in a complete loss, almost any offer can become attractive to a reasonable creditor.

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