Bankruptcy Alternatives & Options

There are options to resolve debts beyond bankruptcy.  Litigation, settlement, and out of court options can be viable alternatives.  Often times, the best outcome requires a combination of strategy.  We can use exclusively non-bankruptcy options if you need or combine bankruptcy with other options for maximum effect.

Alternatives to Bankruptcy and Options to Enhance a Bankruptcy Discharge

There are several general options to resolve debts:

  1. Litigation: attacking a debt head on by objecting to the evidence that you are liable, that the amount claimed is correct, counter claims for damage, and other affirmative defenses such as offset
    • Best Used: if you have viable counter claims, defenses, or to help leverage a settlement
    • Best Avoided: if you lack defenses and counter claims, the amount is small
  2. Settlement: using leverage to pay less than the full rate demanded
    • Best Used: if you have leverage such as viable defenses, are eligible for bankruptcy discharge, are hard to collect against, and/or your assets are protected
    • Best Avoided: if the settlement amount would be too large, if you are judgment proof, or you would file
  3. Bankruptcy (chapter 7): a liquidation bankruptcy best used when unsecured debts are high and your assets would be exempted
    • Best Used: if you have a large amount of unsecured debt
    • Best Avoided: if the debt is non-dischargeable, you have a license/situation that will not let you file
  4. Bankruptcy (chapter 13 or 11): a reorganization bankruptcy best used when you are high income, need to retain a secured asset such as a house, or the debts would otherwise be non-dischargeable
    • Best Used: if you do not qualify for a chapter 7, if you need to retain a secured asset like a house, or if bv you want to keep your business
    • Best Avoided: if you qualify for a chapter 7 and there is no reason not to file, if you have enough income to settle the debts at less than full value
  5. Other out of court options: a very wide range of options that include financing options, loan modifications, avoidance strategies, being judgment proof, and other forms of leverage
    • Best Used: as leverage in a settlement or to avoid court
    • Best Avoided: if it might cause reputational harm, increase costs/fees unnecessarily


Examples of Combining the Techniques

  1. Settlement instead of a chapter 13 bankruptcy
    • You make 150k/year.  You have about 100k of debts.  If you file a ch 13 bankruptcy, you will end up paying 100% of the debts.  If you approach each creditor one by one, you could end up on balance paying only 50% of the total debts.
  2. Settlement combined with a chapter 13 bankruptcy
    • If you file a chapter 13 rights now, you might pay 50k of debts.  If you settled one or two of them first for 30% of principal you might end up only paying 20k
  3. Settlement instead of a chapter 7 bankruptcy
    • You have a single debt of around 20k and are making 50k/year.  The creditor knows you can and will file and might take a lump sum settlement of $2k in lieu of getting nothing.
    • You are judgment proof.  However debts are hurting your credit and making it hard to rent or buy.  You offer a nominal settlement to resolve the debt in lieu of bankruptcy and the creditor getting nothing.
    • You have a license with reporting requirements in case you file.  Settlement is the only way to avoid alerting clients and professional organizations about your debt.
  4. Settlement combined with a chapter 7 bankruptcy
    • Some debts are non-dischargeable.  So we help you to work out a settlement on the non-dischargeable debts while your debt load is high and then file a chapter 7 to discharge those debts while your settlement agreement remains in place.
  5. Litigation instead of bankruptcy
    • You are sued by a landlord for 15k in trumped up charges.  Rather than file for bankruptcy protection, counter sue for violations of consumer protection laws.
  6. Litigation with a bankruptcy backup plan
    • You have a fairly serious consumer protection issue.  However, no cases are absolute and you are concerned what happens if you lose.  We review you to make sure you are chapter 7 qualified so that in the worst case scenario of a loss, you can escape liability for attorney fees and damages.
  7. All techniques used in a nasty divorce
    • Your ex is playing dirty, has quit there job, and is trying to assign you all of the debt while staying in the marital home after getting a DVPO against you.  We can file bankruptcy prior to trial so that you cannot be assigned the debts while preserving your homestead rights so that you can be assigned the home.  We can settle on any debts that survive the bankruptcy to include attorney fees and non-dischargeable debts.  We litigate against any objection to discharge by your ex.
  8. All techniques used in a foreclosure scenario
    • You are behind on the mortgage, your house is upside down in value, and the bank is trying to foreclose.  We litigate against the foreclosure, use mediation to see if we can leverage a loan modification with principal reduction, and extend your time in your house win or lose.  If the house is not economically worth keeping based on the offer on the table, we file a bankruptcy to discharge liability upon the house, credit cards, and other debts.  If any non-dischargeable debts survive, we can help to settle those.
  9. All techniques used in resolving business debts
    • Due to covid, your business has taken a giant hit and laid off staff.  You are not sure if it can survive and you have personal guarantees.  We file a bankruptcy to resolve all your personal debts and your personal liability upon the business debts.  We then approach any business creditors for a settlement based upon you either winding down the business or taking a lower offer that will allow you to survive.  We litigate any objections to your discharge or ipso facto clauses a creditor may claim.

There are an innumerable amount of scenarios where one or more non-bankruptcy techniques may be superior or to make a bankruptcy a more effective discharge.  If you would like to see what strategies we can help you with to avoid or improve the outcome on a debt resolution scenario, call us today.