Sometimes a Debt Workout is a better alternative than bankruptcy.
In simple terms, a debt workout is a negotiated, formal debt modification between all involved parties. Instead of filing for bankruptcy to ease a financial burden, all parties utilize a professional counselor (professional bankruptcy attorney) to help work out a solution agreed to by everyone.
Since the 2005 changes made to bankruptcy laws which made it more to file bankruptcy, debtor and creditor workouts are now more common.
Compositions and extensions are just other names for debt workouts that you might hear as you begin your research. The difference is the two is that a composition is where the creditors agree to a partial payment and an extension is where creditors agree to extend or delay the payment time terms. Of course, there can be a combination of the two.
Both compositions and extensions are legal contracts and as such have certain contract law principles that must be adhered to. It is vital to get professional advice to make sure everything is done correctly.
How debtor workouts affect creditors.
Another reason for legal help is that all creditors need to be involved. If a creditor decides not to be involved in a debtor workout, that creditor still has legal recourse to pursue other means to collect debts owed which means more issues for the debtor.
Advantages of a debtor workout.
The biggest advantage to a debtor workout is that the debtor avoids bankruptcy while achieving similar results. If a workout allows a debtor to reduce or eliminate debt without the stigma of bankruptcy, it leaves the debtor with a less negative credit score. In addition, the debtor retains the right to a future bankruptcy should the need arise.
Disadvantages of a credit workout.
As the workout is completely voluntary, it can be challenging to get all parties involved to the table and agree to a workable solution. Some creditors want payment in full. There have been cases of creditors changing their minds after an agreement has been reached and requesting full payment, although this is rare.
First Steps for a Debtor Workout
The first step to a successful debtor workout in Georgia is to call Wade Everett. Wade has years of experience bringing all parties together and working towards a solution.