- In lieu of declaring bankruptcy, many individuals choose to attempt to reduce the size of their debt by entering into negotiations with the creditors to whom they owe money. Often, creditors will be willing to accept a portion of the money owed them instead of the full amount. This is particularly true if the creditor determines that the debtor is incapable of paying the full amount or that the cost of collecting the debt would be prohibitively expensive.
- While many creditors will be unwilling to allow a debtor to pay less than the full amount owed, some will be willing to allow the debtor to pay the debt under different terms. For example, instead of requiring that the entire outstanding debt be paid all at once, a creditor may be willing to accept regular payments of the debt over a long period of time. This will allow the debtor more time to pay off the debt and to pay it off in smaller, more manageable payments.
- Although an individual may not be able to restructure or reduce his debt, he can take a number of measures to protect himself from some of the ancillary effects of owing a large amount of money. For example, under the federal Fair Debt Collection Practices act, many creditors are required to cease contacting debtors when the debtor asks them to. Individuals can consult with an attorney or a credit counselor about other legal protections his state offers.
- In some cases, a person may not qualify for Chapter 13 bankruptcy because either his debt is not substantial enough or because his income is too high. Perversely, a person may need to take on additional debt or eliminate sources of income to qualify for bankruptcy. While worsening an individual's financial situation is almost always a poor idea, if an individual just barely misses the qualifications for bankruptcy, this may be the best course of action.
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