Understanding Debt Settlement vs Bankruptcy Options

Debt Settlement vs Bankruptcy Options

Being buried under what seems like a mountain of debt can make people automatically assume they need to be in a debt settlement program. However, sometimes debt settlement can be a complete scam in many cases.

Debt Settlement

Debt settlement companies cannot protect you from lawsuits. Bankruptcy protects from all collection lawsuits.

The worse aspect of debt settlement is that it creates liability with the IRS. Any amount of the loan that is “forgiven” or “written off” is a taxable event. In contrast, bankruptcy does not create any taxable liability.

Chapter 7 and Chapter 13 Bankruptcy

Chapter 13 and Chapter 7 will clear the deck of your debt problems. In contrast, debt settlement programs almost never do. In a Chapter 13 and Chapter 7, we need the permission or approval of your creditors. The law is the law.


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The only situation where a debt settlement program has any reasonable chance of success is where there are small number of creditors. Getting a large number of creditors to voluntarily agree to anything is like herding cats. It is not reasonably possible. In cases where there are lots of creditors, the only thing a debt settlement program will accomplish is prolonging the agony of the debt situation.

Pros and Cons of Bankruptcy

Filing for bankruptcy with the assistance of a knowledgeable bankruptcy attorney can be the best choice to either pay creditors more slowly or remove all debts from the slate. Under the right circumstances, bankruptcy has a positive side to it. Chapter 13 bankruptcy turns large debts into digestible monthly payments. And Chapter 7 bankruptcy removes all debts with the exception of student loans and some other debts. Under both Chapter 7 and Chapter 13, many people keep their houses and cars, as well as personal items.

While it is true that bankruptcy will put a hurt on your credit score, the truth is that most people with debt problems have already hammered their credit score. Bankruptcy will allow you to wipe the slate clean and rebuild.

Debt Settlement or Bankruptcy?

How does the average person figure out if debt settlement or bankruptcy makes the most sense? The bottom line that you need take advantage of a free consultation with us and explore your options.

Read our google reviews. We shoot straight with you. If bankruptcy is not a good option, we will explain it to you.

Contacting a Georgia Bankruptcy Attorney

Thinking about contacting a debt settlement company? Contemplating bankruptcy in GA? Before making a final decision, give the Law Offices of Jeffrey B. Kelly a call at (770) 881-8449. The initial consultation to talk about your case is free.

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