What Else to Do if the Trustee Denies Your Bankruptcy
Filing for bankruptcy can be an effective way to get out of debt, but your bankruptcy case is not guaranteed to be approved. In some cases, the bankruptcy trustee will deny your bankruptcy discharge, leaving you without the protection of the court. In this situation, you may want to explore some other alternatives.
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Another Bankruptcy Type
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Many people who want to get out of debt file for Chapter 7 bankruptcy because it allows them to have their debts completely eliminated. If the bankruptcy trustee denies your discharge in a Chapter 7 bankruptcy case, it does not necessarily mean that you cannot try to file for another kind of bankruptcy. Chapter 13 bankruptcy is another alternative, which allows you to set up a repayment plan with your creditors and protects you from further collection actions. You may qualify for that type of protection even if you do not qualify for Chapter 7.
Debt Settlement
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If you cannot qualify for any kind of bankruptcy, another alternative to consider is debt settlement. With debt settlement, you negotiate a payment plan with your creditors on an individual basis. Typically, your creditors will be willing to take less than what you owe so that they can receive a one-time payment. You make a lump-sum payment and the creditor forgives part of the debt that you owe. This hurts your credit, but it is not quite as damaging as going through bankruptcy.
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Debt Management Plan
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Another option to consider is a debt management plan. With a debt management plan, you work out a payment plan with all of your creditors at the same time. The creditors agree to lower your interest rates as long as you stick to a specific payment schedule. Once you enter into this payment plan, you cannot continue using the credit accounts any longer. This may not damage your credit as much as other options because you are still repaying your debt, even if it is at a reduced interest rate.
Considerations
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If you do not pursue a debt settlement or a debt management plan, another option is to simply continue making small payments on your debt. If you stop making payments, your creditors can file lawsuits against you and get judgments to collect what they owe. Creditors can then use these judgments to seize your assets or to garnish your wages until the debt is repaid. If your bankruptcy is not approved, you also always have the option to try and file again at a later date.
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