If you find yourself in financial trouble, you may be avoiding bankruptcy. In fact, debt settlement might seem like a better option. However, debt settlement companies prey on consumers’ fears of filing bankruptcy. So, what should you do? We recommend that you do research and weigh all of your options before making a decision.
Debt Settlement
Debt settlement is a process by which you work with your creditors, either on your own or with assistance, to settle a delinquent account by offering to pay a lump sum that is less than what is owed. Keep in mind that you will need to have cash on hand to pay the lump sum as well as the attorney or company that you may be using for the settlement. In most cases, additional fees are applied to the amount owed and can pile up quickly.
Settlement companies often ask you to stop making payments on your debt. The idea is that you will be able to save money in order to make a large lump sum payment later. However, your missed payments will be considered delinquent. Did you know that these delinquent payments show on your credit report? The result is your score being lowered. Also, late fees and penalties will continue to accrue if you stop making payments. Remember, you run the risk of dealing with collection agencies or being sued.
In the event of a successful settlement, you may need to pay taxes on that forgiven debt. One way to avoid this is through bankruptcy. However, you will need to speak with a professional attorney to find out if this is a possibility for you.
Bankruptcy
While bankruptcy may seem intimidating, it is a great option to reduce or eliminate your debt. The bankruptcy process varies based on the chapter under which you file. Each chapter will either allow you to discharge or come up with a repayment plan to pay off a smaller portion of your debt. Unsecured debts like credit cards, medical, and even some tax debt, can be erased in a Chapter 7. You will want to speak with a bankruptcy attorney to find out what will work best for your current situation.
If cost is a factor, do not write off using a professional bankruptcy attorney to help you through the bankruptcy process. Before making any decisions, schedule consultations with bankruptcy attorneys. Shop around and get as much information as possible.
An important feature of a bankruptcy is that a temporary freeze, or automatic stay, is placed on all collection actions against you. The automatic stay includes repossession, foreclosure, and protects your utilities from being shut off for nonpayment. While bankruptcy may initially hurt your credit, it also removes many of your debts. This places you in the best position to begin rebuilding good credit.
Want More Information?
Don’t let debt settlement companies scare you away from weighing all of your options. Determining which option is better for you will ultimately depend on your unique situation. So, meeting with a professional bankruptcy attorney to see if bankruptcy or debt consolidation will best remedy your financial situation is recommended.
At the Law Office of Daniela Romero, we believe in relationships that are based on trust. Before we work together, we would like to get to know you. We also would like you to get to know us. We want you to be sure you are the right fit for us and that we are the perfect fit for you. This will allow you to be completely comfortable sharing intimate and difficult details of your case, so we can offer you representation to the fullest extent of the law. Call us today to set up a free consultation.