Madgett LawMinneapolis · Minnesota

Bankruptcy Avoidance

Bankruptcy isn't the only option. Debt settlement, consolidation, and creditor negotiation in Minneapolis, Minnesota, before you file.

Practice
06 / 13
Sections
05
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2 min

Many people call about this when they’re already behind. That’s normal, and being behind doesn’t by itself close off settlement, consolidation, or a negotiated repayment plan. Time is what closes doors. Once a creditor has sued, gotten a judgment, and started collecting, the options narrow.

Bankruptcy isn’t the only way out. Sometimes it’s the right one, and when the numbers point there we’ll say so and refer you to bankruptcy counsel. But it costs you something even when it works, and it’s worth looking hard at the alternatives first.

What bankruptcy costs

  • Your credit. Bankruptcy can hurt your credit for up to 10 years, which can make it harder to get a loan, find housing, and even get hired.
  • Your property. Depending on the type of bankruptcy, you may be forced to sell some assets to pay creditors.
  • Your time and your nerves. The financial and legal side of a bankruptcy can be draining, and it can take a toll on the rest of your life.

The alternatives

  • Debt consolidation. Rolling several debts into one loan at a lower interest rate. One payment instead of several, and it can bring the monthly total down.
  • Debt settlement. Negotiating with creditors to settle for less than the full amount owed. It can be a viable option for someone with significant debt and limited income. It usually takes funds to settle with, and it can carry tax consequences.
  • Credit counseling. A credit counselor can help you build a budget and a plan to pay the debt down.
  • Negotiating directly. You can contact your creditors yourself and ask for a lower interest rate, longer payment terms, or even debt forgiveness.
  • Income-driven repayment. Federal student loans generally offer income-driven repayment plans that adjust your monthly payment based on your income.

What we do

  • We go through your income, debts, and assets to see what’s actually possible.
  • We work out a plan with you.
  • We negotiate with your creditors on your behalf.
  • We explain each option in plain terms and walk you through each step.

What to do first

Pull together statements for every debt, any letters or court papers you’ve gotten from creditors, and your recent pay stubs. Keep a log of who calls you and when. And call sooner than feels necessary. I’d much rather see you two payments behind than after a judgment.

Talk to us

The earlier you call, the more paths are still open. Send us a message or call 612-470-6529 for a free consultation.

Common questions

Can I still avoid bankruptcy if I am already behind on payments?

Often, yes. Being behind is common at the point people first call, and it does not by itself close off settlement, consolidation, or a negotiated repayment plan. What narrows the options is time — once a creditor has sued, reduced a claim to judgment, and started collecting, the leverage changes. Earlier calls have more paths available than later ones.

How long does a bankruptcy stay on a credit report?

Under federal credit reporting law, a bankruptcy generally remains reportable for ten years from the date of the order for relief or adjudication. Most other adverse items — collections and charge-offs, for example — generally come off after seven years, and a civil judgment can stay longer if the governing statute of limitations runs longer. That difference is one of the practical reasons to look hard at alternatives before filing.

Is debt settlement better than bankruptcy?

Neither is better in the abstract; it depends on what you owe, to whom, what you own, and what your income looks like going forward. Settlement can preserve assets and avoid a ten-year credit mark, but it usually requires funds to settle with and can carry tax consequences. Bankruptcy discharges more but costs more in other ways. We'd rather lay out both than sell you one.

Will creditors stop calling while we negotiate?

Not automatically. Some collection conduct is regulated by federal and Minnesota law, and there are steps that can change what a collector is permitted to do — but a negotiation on its own does not switch off contact the way a bankruptcy filing does. Keep a log of who calls and when, because that record occasionally becomes a claim of its own.

When is bankruptcy actually the right answer?

When the debt load is genuinely beyond what any realistic repayment or settlement can reach, when income is not recoverable in the near term, or when a filing protects assets that alternatives cannot. We will say so plainly if that is where the numbers point, and refer you to bankruptcy counsel. Steering someone away from a filing they need is not a service.

Also under “My credit or identity is at risk”

Credit File CorrectionsWhen a credit report says something false and the bureau will not fix it — Fair Credit Reporting Act disputes, reinvestigation failures, and litigation against bureaus and furnishers.Identity Theft & Data ProtectionIdentity theft and data breach work in Minneapolis, Minnesota: credit report disputes, litigation, business breach response, and privacy compliance.