Even though I provide debt relief as a Campton Hills bankruptcy attorney, many people want to know about bankruptcy alternatives. There’s always an alternative to filing for bankruptcy. Bankruptcy is not the only solution, it’s one of the solutions and usually a pretty good one but it’s not the only one.
If you are someone who has the ability to repay either all or a portion of your debt over time then you may want to try avoiding bankruptcy by working out a payment plan with your creditors. In many cases creditors will accept a payment plan as long as you can show a consistent payment history and as long as the debt is not so excessive where a payment plan would just be pointless.
In some cases you can even pay less than what’s fully owed in exchange for one lump-sum payment. Now, to be able to do that arrangement you have to have funds sitting on the sideline from some other source available to pay the creditor less than what is owed. Many times people will tap into their 401K or other retirement account in an effort to get out of debt; I do not recommend that you do that.
First of all you’re going to have a penalty for taking the money out of your retirement account early and, two, that money is set aside for your retirement for a reason. Many people come to see me after they have already depleted their 401K or other retirement account in an effort to get out of debt by making payments to creditors. Unfortunately, if these people would have come to see me first I would have advised them that I can get them out of debt under Chapter 7 bankruptcy and they can protect 100 percent of what they have in a 401K or other retirement account. The mistake is made when they choose not to seek bankruptcy advice.
So, if you’re thinking of getting out of debt please do not think of tapping into your 401K or other retirement vehicle. I recommend you look at all of your options which include allowing the creditor to garnish your wages. You heard that correctly. The wage garnishment laws allow for a 15 percent garnishment on your income. If you are somebody who does not have high income and you do not have the ability to repay that creditor then you may want to allow that creditor to obtain a judgment and garnish your wages. The courts in Illinois are not going to allow more than a 15 percent deduction in terms of wages. So that is one option, you can let a creditor just continue to take a little bit per pay period in an effort to pay off the debt. If it gets to be too much, then contact a Chapter 7 bankruptcy attorney for assistance.