Instinctively, people feel they should avoid bankruptcy and should pay their debts. Obviously, that option would preferable. Nobody really wants to file for bankruptcy. But sometimes, circumstances require a professional review of available options.
Unfortunately, too often, people jump to select Debt Settlement, without full investigation.
This is how Debt Settlement works: You sign an agreement to have the company take a fixed amount of money from your bank account monthly for up to five years. The Debt Settlement company notifies creditors that they have been hired.. They tell their customers that they should stop paying their credit cards and not to worry about anything
But there are three things they do not tell you:
ONE: Before they pay creditors the Settlement Company takes a big fee for themselves (usually more than a bankruptcy attorney would charge to file chapter 7 or chapter 13.)
TWO: After that, they save your money until they have accumulated enough to settle with one creditor. After that, the start saving to settle with the second creditor. The Debt Settlement company has no ability to control the creditors while money is accumulated to make settlements. Eventually, creditors that you are not paying, and that have not received a settlement offer, lose patience, start calling you, and start suing you. There is no protection like the Bankruptcy Stay with the enforcement power of a contempt motion against any creditor that continues to call or sue. So, you end up with bad credit for not paying and judgments are entered. Your bank account can be frozen. Your pay can be garnished,. A lien can be placed against your house.
THREE: You will get a 1099-C form from the creditor for “Cancellation of Debt Income” in the amount of any discount the Debt Settlement Company obtains for you, and you will have to pay income tax on it. They not only send this 1099 form to you; they send it to the IRS and NYS. If you don’t’ report on your tax return, the IRS and NYS will eventually catch up with you you and you will have to pay not only the tax on the unreported “income” but will also will have interest and penalties due to the government for not paying the tax.
There are certain situations in which Debt Settlement is the only option:
- If you will lose your job or your professional license if you file for bankruptcy
- If you have assets that your bankruptcy lawyer can’t protect for you.
- If someone else is jointly responsible for this debt with you and they cannot or will not consider a bankruptcy option
- If you can pay off all your debts in one year.
Call (718) 442-4424 x 219 for a free consumer bankruptcy consultation by phone, by Zoom, or in-person..
You will learn:
- Whether you are eligible for bankruptcy.
- If so, what chapter would be best for you
- Even if you are eligible, are there hidden risks that make bankruptcy a bad idea.
- If risks are identified, what strategies can be used to avoid them
- What are your bankruptcy and non-bankruptcy options
- A forthright opinion as to which option would be best for your particular circumstances, whether or not we are retained to file a bankruptcy petition for you.
Paul Hollender, Board Certified Bankruptcy Attorney https://www.silawfirm.com/attorney/paul-hollender/
48 years experience: The dean of Staten Island bankruptcy attorneys.
SuperLawyers
American Board of Certification
Martindale-Hubbell Peer Rating: AV ( the highest)
AVVO.com Rating 5.0/5.0
American Bankruptcy Institute
National Association of Consumer Bankruptcy Attorneys
Recommendation : Before jumping for the Debt Settlement option, consult an attorney who specializes in Bankruptcy Law, so you can make an educated decision as to the best option for you