Debt Relief Options

Bankruptcy Alternatives - $99 BankruptcyFor most people, options to filing bankruptcy are not realistic. They include debt settlement, credit counseling, refinancing a home mortgage, and reverse mortgage, all discussed below. Find out more on our FAQ page, or you may call me at 417 4NO-DEBT (466-3328), or use the Contact Form, for a free consultation.


A bankruptcy attorney is a great negotiator to help you settle your debts, because creditors know the attorney can file a bankruptcy for the client if the creditors are not reasonable. They know they might not get any payment on the debt if a bankruptcy is filed.

In order to settle a debt with a creditor, it is best to offer a lump sum of cash to be paid within 30 days of the settlement offer. For example, if you are trying to settle a $10,000 debt with a credit card company, you would offer $5,000 payable in 30 days. If accepted, you would need to immediately pay the $5,000. The creditor will issue IRS Form 1099 for the balance of the debt reduction. This will need to be reported as income on your taxes.

Debt settlement only works if you have some meaningful lump sum to pay the creditor and you are only dealing with one or two creditors. If someone is telling you differently, watch out. There are plenty of scam companies out there who will take your monthly payment and promise to settle your debt for pennies on the dollar. These companies cannot control the creditors from bringing a lawsuit against you while you are saving to offer settlement. Then, your credit is ruined and you still have to file bankruptcy because all of your payment was applied to fees for holding your case open for more than a few months.

Other bad things about debt settlement are:

  • You are paying unsecured creditors more than what a competent attorney could file a bankruptcy for you.
  • Debt settlement does not always address all of your debt and/or budget problems.
  • You are creating non-dischargeable tax debt, or income tax debt that cannot be erased or reduced if you later file bankruptcy.


If your debt is not very high and you can afford to pay more than the minimum monthly payment, credit counseling may be a good option for you when compared to bankruptcy. Credit counseling will contact your creditors to see if they will participate in the credit counselor’s program. The creditor will agree to take a lower interest rate in exchange for the promise of a regular monthly payment. You pay a monthly payment to the credit counseling agency. They, in turn, will pay the participating creditors their share of the payment.

You need an experienced attorney to guide you to whether credit counseling is for you, especially if your repayment period is more than three years. If you are going to be in a repayment program of five or more years based on what you owe, you may be better filing a Chapter 13, which may be only three years.

As you may have noticed, the creditors must agree to participate in a credit counseling repayment program. In bankruptcy, the creditors have no choice but to participate.

Be cautious when selecting a credit counseling company. The only one I can recommend is GreenPath Consumer Credit Counseling. I have referred many people to them. If you do not need bankruptcy, I will be the first to tell you.


Usually, this is digging a bigger whole to fill the smaller ones. However, partnered with the right mortgage banker, this may be a better option than bankruptcy. I partner with one of the best mortgage bankers in the area. If this is the right option for you, I will let you know, and guide you to what works best for you.