Struggling with Debt? Learn about Bankruptcy and Other Relief Options

This article is part of a comprehensive guide to bankruptcy in Oregon. Go here to read the guide and see related articles.

Debt can be stressful, but there are options that may help. This article explains different ways to manage debt, including bankruptcy and other solutions, so you can decide what works best for you. 

What are my debt relief options besides bankruptcy? 

If you're struggling with debt, bankruptcy isn't your only option. Here are other ways to manage debt:

1. Work out a payment plan with creditors.

   Some creditors (people or companies you owe money to) may lower your interest rate, extend payments, or let you settle for less than you owe. You can negotiate on your own or work with a nonprofit credit counseling service to help you. 

   For more on negotiating with creditors:

   • Read this guide by Oregon Consumer Justice, a nonprofit in Oregon that helps consumers.
   • See this article by the Consumer Financial Protection Bureau, a government agency. 

2. Get help from a credit counseling service.

   A nonprofit credit counselor can help you create a budget and find solutions for repaying debt. They may also work with the businesses you owe on your behalf to set up a debt management plan that lowers your monthly payments. 

   Be wary of for-profit debt relief companies. Look for accredited nonprofit credit counseling agencies that provide free or low-cost help. 

   This article from Oregon's Department of Federal Regulation provides helpful tips for finding a reliable credit counselor.

3. Consider debt consolidation.

   If you owe money to different lenders, you might combine your debts into one loan with a lower interest rate. This can make payments easier to handle.

4. Do nothing.

   The law protects a minimum amount of money and some types of income from debt collection. If debt collectors can't take your money or possessions because of these protections, you may be what is sometimes called collection-proof or judgment-proof, and you may not need bankruptcy. 

Am I collection proof? 

You may be protected from debt collection if: 

• Your only income is Social Security payments, disability benefits, unemployment, or certain other benefit payments or public assistance. 
• You do not own valuable possessions or property that creditors can take.
• You don't have much money in your bank account.
• Your wages are too low to be taken under the law. 

Tips: 

• You may not be collection-proof forever. If your situation changes, debt collectors may be able to take your pay or possessions.
• Even if your income and property are protected, creditors may still contact you or sue you. Some people still choose to file for bankruptcy to stop collection calls, lawsuits, or the stress of unpaid debt. 

Learn more about what it means to be collection-proof here.

Does bankruptcy make sense for me?  

If you can't afford to pay your debts, bankruptcy may help by wiping out or reorganizing your debt. It can stop lawsuits and prevent debt collectors from taking money from your paycheck or bank account—but it can also have long-lasting effects.

Bankruptcy may be a good option if:  

• You have more debt than you can afford to pay back.
• Creditors are suing you or taking money from your paycheck or bank account.
• You are afraid you might lose your home or car because of missed payments.
• Other debt relief options haven't worked.
• You're not collection-proof.

Bankruptcy doesn't erase all debt. You'll still need to pay child support, most student loans, and some taxes. It also impacts your credit for several years, which can make it harder to get loans or housing.

Thinking about bankruptcy? Learn what it can and can't do before deciding.

Summary:

• The right debt relief option depends on your situation. 
• Some people can work out a payment plan with creditors or with the help of a nonprofit credit counselor.
• Others may need bankruptcy to get a fresh start.
• Bankruptcy can stop collections and some lawsuits, but it has long-term effects.

To learn more about bankruptcy, go to our guide here and follow the decision steps.  

Frequently Asked Questions