Are you considering bankruptcy? Are you hesitant to take the jump into bankruptcy when you think that there may be other options? Sometimes, bankruptcy is the best way to eradicate debt and get a fresh financial start. Yet if you only owe on one particular account or if you believe that the debt is not surmounting, then you may be able to negotiate with creditors and avoid bankruptcy altogether while still dissolving some of your debts.
One way to avoid bankruptcy and still satisfy existing debt is through non-bankruptcy work-outs. The term workout is used to describe a formal, mutually-negotiated modification of debt that does not involve a bankruptcy filing. A workout is an agreement that is worked out between a debtor and his or her creditors for the payment of the debts that exist. The agreement is negotiated without the court hearings and the paperwork that is involved in a bankruptcy process.
There are two different types of non-bankruptcy work outs that are commonly used to satisfy debts and help a debtor to avoid bankruptcy. The first is called a composition. This is a contract that is created between a debtor and multiple creditors. The creditors in the arrangement will agree to take a partial payment and consider the debt fully paid. This is a grace action, and the creditors are at liberty to deny or accept a composition claim.
For example, if a debtor owes $10,000 in credit card debt and $4,000 in payments on another card this would constitute an opportunity for a composition. If the debtor can't pay the expense, he can either file for bankruptcy to discharge the debt or he can work towards a composition.
In a composition, a creditor will agree that the debtor pays less than owed and the debt will be considered paid in full. This can be a benefit to creditors that would lose all the money if the debt was completely discharged in a bankruptcy. Instead, the creditor may say that the debt can be considered paid if the debtor can just pay $5,000 in total to be split among creditors.
The other non-bankruptcy workout that is commonly employed is an extension. This is a contract between a debtor and multiple creditors where all creditors agree that they will extend the time for their payments to be made. For example, if a debtor is supposed to pay all medical bills within a month, an extension would be a contract that allows this debtor to have more time to obtain the money.
In some situations, creditors may create a workout that is a hybrid of a composition and an extension. This means that creditors may allow a debtor to pay less to satisfy the debt and give the debtor a longer time to complete this. The same laws govern all different non-bankruptcy workouts. Both of the arrangements are subject to contract law principles. This means that the workouts must satisfy all requirements of contract formation, which can vary depending on which state you live in.
The laws declare that there must be an offer ot make the contract and the debtor must accept this offer. There must also be a consideration, which means that something of value must be exchanged between parties in order to legalize the contract and make it binding. If you would like to explore a non-bankruptcy workout like this one, it is important for you to seek assistance in your case. You will want an attorney to help you with your case right away. Don't hesitate to call an attorney near you to assist you in this arrangement!