Most alternatives to bankruptcy involve wishful thinking

05 Jul Most alternatives to bankruptcy involve wishful thinking

Magical thinking about debtClients arrive in my office hoping that I can explain the secret alternative which will solve their debt problems outside of bankruptcy.

Why not?

Ads for debt settlement companies and do it yourself books always promise to reveal the tricks ( known only to someone who wants to sell you something) to make your bills vanish for pennies.

I’m tempted to ask clients: do you also believe in the tooth fairy, Santa Claus, and leprechauns with pots of gold?

Unkind, I know. But in the information age, it ought to be obvious. There are no painless, quick fixes.

It is theoretically possible to get a settlement of each of your debts that gives the same result as bankruptcy. But it is seldom a realistic option because

  • It requires cash to pay each settlement
  • It requires 100%l of the creditors to agree to terms
  • It takes time and effort to negotiate deals
  • Not all creditors are prepared to deal, or to stand by a deal they’ve promised
  • It’s dependent on no unpleasant financial changes in the future

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 o

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.

San Francisco Bay Area Bankruptcy SpecialistCathy Moran helps individuals and small businesses in Silicon Valley with their bankruptcy issues . She can often be found on Google+ and on Consumer Ledger, where she shares information about consumer protection issues and personal finance.

Image courtesy of wikimedia and SatyrTN.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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