Arkansas Bankruptcy Alternatives


While bankruptcy can be very helpful for people dealing with uncontrollable debt, some people don’t want to or can’t file bankruptcy. In this post we discuss the different reasons for not filing bankruptcy and the alternatives that exist for debtors who decide not to file bankruptcy. While bankruptcy is a great option and is helpful most of the time, there are other ways a debtor can fix their debt situation. You should consider consultation from our Arkansas Bankruptcy Attorney to discuss your financial situation.


There are many reasons why a debtor may decide bankruptcy is not the best option for them. A very common reason for not filing is that debtors don’t want to start over with their credit score. While in most bankruptcy situations the debtor’s credit will actually be improved by filing, there are some situations where the debtor has good credit despite being in debt. A common incorrect assumption about people who file bankruptcy is that the debtors have debt up to their eyeballs and can’t make their monthly payments on their debt. That can be true, but some debtors are making their payments up until the month that they file bankruptcy. These debtors care about their credit very much and want to keep it at all costs. Some of them know they will be unable to do so in the long term and make an informed decision to file bankruptcy to better set themselves and their finances in the future. However, some debtors, as interested as they might be in bankruptcy, either feel a strong obligation to paying their creditors or decide that they would rather attempt to solve their financial issues by paying their debts in a way that is manageable to them.

When these debtors decide not to file bankruptcy, what is their next move? What’s their plan? It varies from debtor to debtor. Some of them will take the simplest road possible and just keep making their monthly payments, either at the minimum or at the highest they can afford without going in the hole. As long as their salary stays the same or increases, they should be able to eventually get there.


Other debtors are in much more difficult situations. They are so behind on their payments that they can’t catch up by simply making their monthly payments due to increased charges based on late fees and higher interest rates. Many debtors in this situation decide they need to consolidate their debt and have someone else manage the payments for them. There are numerous companies providing that work, ranging from debt settlement companies to debt management companies. The debtor should make sure to research the companies prior to making any deals with them as there are some that can be fraudulent or simply inept. The worst thing a debtor who eschews filing bankruptcy can do is end up with a bad debt consolidation, settlement or management company because it will make things much worse for the debtor and they will end up filing bankruptcy at the end of the day.

Another issue to look out for in these situations is ensuring you know the company’s plan to resolve these debts. Many debtors end up getting sued by the creditors despite making agreements with the debt consolidation companies. What debtors fail to realize is that these companies have to be paid their fee first and money does not get distributed to creditors until that occurs. This fee is high enough that it will take multiple monthly payments to get to that point. Unfortunately, the creditors are not patient in these situations, which hurt the debtor’s credit immensely, and can end up suing the debtor for a debt the debtor thought was under control. Debtors can sometimes be under the mistaken assumption that the creditors are aware of the consolidation plan and are satisfied. Creditors are not parties to this agreement and want what is owed them on the terms that they agreed upon with the debtor.


Some debtors who decide not to file bankruptcy have an ace in the hole when it comes to repaying their debt: they have enough money to make a settlement offer. If a debtor has a cash reserve of some type, which most debtors do not, then they might be able to pay off their debt or settle it for less than the full amount owed. If the debtor has enough money and doesn’t want their credit to be seriously damaged, then their best bet is try paying off the debt in full. It will show up like that on their credit report and not affect them in a negative manner.

Most debtors are not able to come up with that type of cash, so they need a more affordable option. Those debtors can do what is called a debt settlement. They can attempt to make an offer to the creditor to pay a lump sum of money that will settle the debt with the creditor. The amount the lump sum should be truly depends on the creditor. Some creditors require 70% of the debt be paid at a minimum, while others lean closer to 55% or so. If the creditor acquired the debt cheaply enough, they may even take less. Some debtors can negotiate this reduction themselves, while others hire an attorney to assist.


Most debtors cannot afford to make lump sum payments on their debts. They might end up getting sued on these unpaid debts as many creditors refuse to work with the debtor in any reasonable manner that can lead to smaller monthly payments. However, this outcome can have a silver lining. The debt collection gets turned over to the attorney’s office that is suing the debtor. These attorneys will routinely attempt to work out payments plans for the creditors, which will assure that the creditor is able to collect some money on the particular debt. The amount of the monthly payment will depend on the amount owed and the length of the payment plan. However, these monthly payment plans are great options for debtors who are not filing bankruptcy as they are more affordable than the other options listed and the interest rate will be set by the state rate as opposed to an arbitrary number selected by the creditors.

If a debtor cannot afford any of the above options, then their best choice is to file bankruptcy and get their debt situation straightened out. It is never a bad idea to consult with an Arkansas Bankruptcy Attorney to learn the most attractive options for your specific situation, whether bankruptcy alternatives or filing bankruptcy.

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