Liquidate Assets

Sometimes a person can sell enough surplus assets to pay the creditors in full.

This option is rarely a practical option for most individuals because the money they receive from the sale of their assets is less than the amount of their debts. In most cases, liquidating their assets will not retire all of their debts. They are left with no assets but still a significant amount of debts.

The only time this option makes any sense is if you have more assets than you have debts, in which case, you can sell some or all of your assets and pay out all of your debts.

It may make sense to consider this option if you have enough assets that can be sold to significantly reduce the level of your debts to an amount that you can afford to pay on a monthly basis without sacrificing everything.

Caution should be exercised here as this is a tremendous lifestyle decision, and you may be disposing of assets that would otherwise be protected in one of the other options.

If you choose to sell some of your assets to reduce your debt load to an amount that you can handle, all creditors should be paid the same percentage of their debt, so that no one can complain that they were treated unfairly. If you pay one or some of your creditors, and not the others, the creditors not receiving any money could say that you are “preferring” the others.

The sale of some assets may be taxable and you will have to be sure to retain enough from the sale of the assets to pay the taxes owing on the sale.

Prior to selling any asset you should consider if the asset is protected from your creditors. It is possible that your creditors may not have the ability to seize or sell the asset that you are considering selling to pay of the creditors.

Remember that even if you pay your debts in full, your credit history will reflect the problems that you had paying your creditors. The note on your credit report that you paid your debts in full will not cover the fact that you had problems making your payments when required.

Remember there is always a risk that your call to a creditor could precipitate that creditor taking action to seize your assets or garnishee your income.

There is nothing in this option that will stop your creditors from taking action against you.