Bankruptcy FAQWhat are the Alternatives to Chapter 7 Bankruptcy?The term "workout" is used to describe a non-bankruptcy negotiated modification of debt. More simply stated, a workout is an out-of-court agreement between a debtor and his or her creditors for repayment of the debts between them, which is negotiated without all the procedural complications — and perhaps the stigma — of the bankruptcy process. Why Choose a Workout?There are a variety of reasons why a debtor might prefer a workout to bankruptcy. By entering into a voluntary agreement with creditors, the debtor avoids the stigma that attaches to bankruptcy but achieves the same results — discharge from all or a portion of his or her debts. In fact, a workout discharge can be even broader than a bankruptcy discharge. In addition, a workout discharge does not affect the debtor's rights to file a future bankruptcy, whereas certain types of bankruptcy discharges do. The main advantage of a workout is that both the debtor and the participating creditors voluntarily enter into it. In a workout, unlike bankruptcy, the majority of creditors cannot cram down concessions on dissenting creditors. Non-Bankruptcy Alternatives
Bankruptcy Alternatives
Non-bankruptcy alternatives such as compositions and extensions have several benefits. However, in some circumstances, a debtor is afforded greater protection by a formal bankruptcy, and attempting a workout may just prolong the financial agony and delay the inevitable. An attorney who has experience in bankruptcy and debtor-creditor law can help both debtors and creditors determine whether a workout is the best option for debt repayment, or whether bankruptcy is the better choice in their particular circumstances. Copyright © 2008 FindLaw, a Thomson Reuters business DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent counsel for advice on any legal matter.
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