Appropriate Situations to Consider Bankruptcy Alternatives

August 10, 2014

Bankruptcy Alternatives

The ideal debt management solution involves a minimal amount of risk, cost and credit impact. As such, bankruptcy isn’t always the best option.

Often times, there are alternative solutions that are a better fit. For example, debt consolidation, negotiation, or litigation can be viable options for those considering bankruptcy.

For consumers seeking financial stability—not just a short-term band aid—it is important to work with a multi-faceted financial professional.

At Ziegler Law Office, we distinguish ourselves from our competitors because we do not offer just one solution – we are not exclusively a bankruptcy law firm or a debt settlement company. Rather, we evaluate a variety of options.

If you are considering bankruptcy, take a look at the following case studies. These are examples of our tailored debt management solutions. While we emphasize that the resolutions reached in these examples do not guarantee future results, it is important to note the bankruptcy alternatives available.

Case Study 1: Dramatic Result in Debt Negotiation through Creditor Error

A debt collector sued Client for $27,000. The debt collector was a third party who allegedly acquired the debt from the original creditor. We were retained to litigate the case. In the course of litigation we found a weakness in the creditor’s case, which potentially could have resulted in a dismissal of the lawsuit. We used the weakness to negotiate a substantially reduced settlement of $501 to resolve the balance in full.

Result: $27,000 debt settled for $501.

When a creditor attempts to collect a debt through the Court system, they are bound by the Court system’s rules. If the debt collector does not follow the Court system’s rules, the oversight can result in substantial penalties to the debt collector – and in some cases, they can lose the ability to collect the balance all together.

A consumer should retain an attorney familiar with debt collection law who can identify possible mistakes made by debt collectors in the litigation process and use those mistakes to negotiate a favorable result.

Case Study 2: Bankruptcy avoided through Debt Litigation and Negotiation

Client had only one problematic debt that was in default and a lawsuit was filed against him. The debt was over $30,000. Client was retired, had limited income and could not afford to pay the total balance owed. However, Client had some resources in protected retirement accounts that could be used for a reasonable settlement, if necessary.


When a consumer only has one or two problem debts, I generally recommend trying to avoid bankruptcy. While bankruptcy may be an appropriate solution in some cases, it does come with a cost – including credit impairment. However, if a lender is unwilling to negotiate a reasonable settlement – even on just one loan – bankruptcy may be the only reasonable option.

In this case, I recommended that we first try to negotiate down the balance of the loan to an affordable amount, and if unsuccessful, then we would use bankruptcy as a fall back option.

We began negotiating on the balance of the loan before defending the lawsuit. The creditor initially offered $16,500.00. After a negotiation process, the creditor came down to $10,300. This was still beyond my client’s affordability.

We then began litigating the lawsuit by filing a motion to dismiss and discovery to evaluate weaknesses in the lender’s case. The lender responded to our motion and our discovery, and based on the response we felt that the lender had a probably of winning the lawsuit. I explained to lender’s counsel that I was recommending my client file bankruptcy unless we could reach a reasonable settlement. After further discussion, the lender reduced their settlement to $8,500. This was within my client’s affordability and we accepted.

Result: $30,000 debt settled for $8,500.

Debt Collectors are routinely told that the consumer is going to file bankruptcy. Playing the “bankruptcy card” only helps negotiating debt if the threat is credible. In this case, we were able to use the bankruptcy threat credibly because 1) the threat was coming from an attorney who files bankruptcy, and 2) we have exhaust all other alternatives. This created leverage to reduce the lender’s settlement position by almost $2,000.

Case Study 3: Bankruptcy appropriate for one unmanageable debt

In contrast to Case Study 2, here we also had one problematic debt, but the debt was over $100,000 (resulting from a litigation issue). The Client had about $15,000 per year in income, and no assets that could assist in negotiation. In this case, negotiation would have been futile given the starting point of the debt and the limited resources available to negotiate. Bankruptcy was pursued and the debt was discharged.

Consider the Alternatives

Before hastily proceeding to bankruptcy, it is important to consider your options. Working with a Clearwater debt attorney—like those at Ziegler Law Office—can oftentimes produce debt management solutions that have a minimal amount of risk, cost and credit impact.

If you are interested in learning more about bankruptcy alternatives, fill out the form to the right. We’ll meet with you one-on-one to review your situation and suggest a tailored debt management solution that is just right for your circumstances.

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