Chicago Bankruptcy Question: Do I have options other than bankruptcy for unsecured debt?

Chicago Bankruptcy Question of the Day:  Do I have options other than bankruptcy for unsecured debt?  You always have options, even if you are in significant debt.  You can go it alone and try and pay your way out of debt, you can attempt a debt consolidation or you can attempt a debt settlement program.  You must, however, be very careful as to who you work with.  There are many, many companies out there promising the world that do not deliver and put you in a worse position than where you started.  Lisa Madigan, the Illinois Attorney General, has been fantastic about going after these companies and protecting consumers.  She has an excellent website with a lot of information, so be sure to visit it before committing to any form of assistance.

Going it alone:  If you have consistent income and your debt is not totally overwhelming, it is possible for you to get out of debt on your own.  What we recommend is that you first gather a good list of your creditors, their contact information, the amounts owed and your monthly payments.  Prepare a budget that shows exactly how much you can afford to pay back each month and if you will have lump sums available, such as an income tax refund or annual bonus, available to settle individual debts.  Contact each creditor, close the accounts, set up a fixed payment plan or settlement amount, GET IT IN WRITING and work through each debt.  Your credit will be much improved, you will not incur any legal fees and, after a difficult budgeting stretch, you will be in a much better financial position.

Debt Consolidation:  We are not a fan of debt consolidation companies, even those who are legitimate and try to help people.  The usual structure is that these companies put you on a plan wherein you pay them a fixed monthly payment.  They will then attempt to work out payment arrangements with your creditors.  There are three main problems with this model.  First, the creditors do not have to agree and the consolidation company has no legal power to stop them from proceeding with collection action.  Second, even if your creditors agree to a plan, they are still destroying your credit by reporting late or insufficient payments.  Third, interest and penalties still accrue while the consolidation company is working with these creditors, so your debts usually do not reduce any near as quickly as promised.

Debt Negotiation and Settlement:  This is a process where your debts are negotiated to a lower amount and settled, either through lump sum payments or fixed payments made directly to your creditors.  In this process, you want an experienced attorney negotiating on your behalf.  The creditors do this every day and have plenty of tricks up their sleeves to fool you into paying more than you should.  Make sure your interests are properly protected.

With a variety of options available to you and your debts mounting, you need to seek the advice of an experienced consumer rights attorney.  At Ledford & Wu, we are happy to offer you a free consultation to discuss your situation and help you determine what your best option is.

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