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What Are Some Bankruptcy Alternatives?

Author : Jim Brown

As a bankruptcy attorney I often find that people are confused when talking about debt relief solutions. Many times when people come to our office they are still looking for alternatives to bankruptcy such as credit counseling services or debt settlement programs.

People need to realize that bankruptcy does not carry the stigma that it used to. The truth is that filing for bankruptcy is a federally backed way to give debt ridden people the results they're looking for. They're usually surprised to hear this when faced with a credit counseling service, working with a debt settlement program, or bankruptcy.

First, let's look at how these different services work:

Credit Counseling:

Although credit counseling services might appear to be a simple solution: you just sign up with them and they'll negotiate a lower monthly payment, right? Wrong. Working with credit counseling might actually get you a smaller monthly payment, however absolutely nothing is done about the interest, which will continue to grow on your account. Countless times I have helped clients who were preiously signed up with services like this, and so many times their debt actually increased because those services did nothing to take care of the interest. Making payments that were actually too low to start lowering the balance didn't help either.

Debt settlement programs:

Debt settlement programs will say they can settle your debt for pennies on the dollar. This isn't quite a lie—but they forget to mention exactly how many "pennies." These debt settlement programs will usually give you an estimate (about 40% of your total debt), then put you on a payment plan for that amount. You might be wondering: What's the catch? For one, they don't even contact your creditors until you have paid a certain amount. This means that your creditors can still come after you while you're paying the debt settlement programs' fees and making monthly payments!


Bankruptcy is a legal tool to help customers take control of their debt. Over the years it's evolved quite a bit. When you work with a bankruptcy attorney you can often get rid of garnishments and credit card debt.

How though, is it different from the other options? First, you won't be dealing with rapidly increasing interest rates. Furthermore, bankruptcy is not a service but rather a legal process. Because it is a legal process your creditors HAVE to acknowledge it. If you work with a debt settlement program or a credit counselor your creditors can pick and choose whether or not they want to work with you. Say for example, your debt settlement program tries to settle with your creditors on your wage garnishments. The creditors don't even have to consider the offer. It is extremely unlikely they would accept something like that. Why would they when they are already getting the money they want (plus interest)?

Bankruptcy, unlike these services, forces your creditors to stop garnishments when you file your case. You can even recover the wages they garnished in most cases.

Author's Resource Box

James Brown is a personal bankruptcy attorney in St. Louis, Missouri. He has filed over 30,000 bankruptcy cases and published many books and articles. You can find out the latest developments on personal bankruptcy law at his blog or his website for the best tips on how to prepare for your bankruptcy and find a great bankruptcy attorney.

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Tags:   Missouri and Illinois bankruptcy book, credit card counseling, debt consolodation

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Submitted : 2010-12-06    Word Count : 1    Times Viewed: 95