Debt Cancellation vs. Bankruptcy

Before making a decision as important as filing for bankruptcy there are a few factors that should be considered to determine whether debt settlement might be a feasible alternative:

Number of Creditors: If you have just one or very few creditors then debt settlement might work for you. Keep in mind that debt settlement requires you or your attorney to deal with each creditor on a case by case basis. Negotiating settlements with multiple creditors will require more time and more attorney fees to reach a result. Compare this with the fixed fee for a bankruptcy case which allows you to know the court cost and the attorney’s fees up front.

Cash Available for Payment: Generally, an offer to pay less than the full amount owed will require the payment of the offer in a lump sum. The purpose of debt settlement is to provide an incentive to settle for less than the amount of the debt, and that incentive is a lump of cash. Settlements for installment payments typically do not reduce the amount of debt owed; instead they tend to prevent wage garnishment or levy.

Other Property or Assets: A bankruptcy filing necessarily subjects all of a debtor’s non-exempt assets to the claims of creditors. For Arizona residents, you have the same state law protections for your property under state law that you would have under the bankruptcy code. Bankruptcy doesn’t protect additional assets but it does stop collections against your future income.

Credit Reporting: Both debt settlement and bankruptcy filing are reported as negative factors on your credit report; however, debt settlement will have a less adverse effect. Filing for bankruptcy over debt settlement will also keep you from obtaining a new mortgage for a longer period of time.

These are a few of the factors to weigh when you are considering debt settlement. In nearly all cases, filing for bankruptcy is the most cost effective option but if you have concerns about your credit in the future or other debts and assets that you want to leave in place, then debt settlement can be the right solution for you.

If a creditor is causing you grief or you are concerned about exposure of your assets, an experienced debt settlement/bankruptcy attorney at Nielsen Law Group is available for a complimentary review of your situation. You can schedule your initial consultation by calling (480) 888-7111 or submitting a web request here.