[schmedlap]

Of course you can deal with the creditors yourself, but it only works if you treat all of them in each class (secured, preferred, unsecured) exactly equally according to amounts, and get all of them to expressly agree in writing to settlement of claims on a specific basis (percentages, time, with or without interest), etc. This is exceedingly hard to do if there is even one of them who does not agree or will not negotiate, for whatever reason.

The alternative to just assigning in bankruptcy, if it looks too difficult to live with the process consequences, is to make a proposal in bankruptcy, through the trustee, in one of 2 forms, depending on the total debts involved. You and the trustee have to demonstrate how whatever is proposed (generally payment of a total over time) is better for the creditors than a simple assignment in bankruptcy. It is put to the all the creditors and if a sufficient plurality and percentage of total debt vote in favor, it is accepted and carried out. If it is rejected or defaulted, there is an automatic or likely assignment in any event. The creditors who do not vote in favor of an accepted proposal are bound by it anyway, and all actions are stayed. If it is successfully completed, all the dischargeable debts (there are some kinds of debts that are not affected) are released. But, a proposal usually is in place for somewhat longer than 21 months.

For those who think bankruptcy is just not "fair" at all to creditors, I would say, of course, there are cases where the debtor is unfairly getting off when at least something could have been paid. Actually, there are extensive rules on background and intra-process behaviour, and creditors can and do file objections to simple discharges. But they have to actually analyse things and bring their complaints forward in the proper form and content, and very few can seemingly be bothered to do so. In many cases bankrupts, particularly repeat ones, are unable to get out unconditionally or within the minimum times. The vast majority, whether due to stupid or irresponsible financial behaviour or pure misfortune (and they do run the entire spectrum), are situations where, without this option and process, there is no realistic chance at all of the debtor ever paying their debts, and it is either this or, I suppose, get a fake new ID in a foreign land (?). Debtor's prisons just won't cut it in a society like ours (?).

A big part of the problem is the drunken sailor approach of many players in our financing sectors to granting credit. One sees repeat bankrupts who, less than 10 years after the first time around, have several of the exact same creditors, in the same context, as last time. The current record-holder in my experience for number of separate credit cards is 32. Vehicle financiers openly advertise that they will finance even known undischarged bankrupts, and I have seen it. I have even seen a chartered bank issue a new VISA card to an undischarged bankrupt as to whom they were one of the proven unpaid creditors relative to the pre-existing card. With this approach it is hardly surprising that a lot of "low information" types get sucked into the vortex of unmanageable debt.