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Debt Settlement

Debt Settlement | Ron Lundquist Bankruptcy Lawyer - Eagan, MN

For many people, bankruptcy represents a financial failure. You may see it as a black mark against your ability to take care of your family or a representation that you will never have financial freedom. That is not, in fact, the case. Bankruptcy is a type of law that exists for your benefit. Unanticipated financial hardship might have sent you into a downward spiral. Bankruptcy can help you stabilize with a fresh start before rebuilding your credit.

That being said, the logical part of your mind might want to investigate other options first. Or, you may wish to do everything in your power to pay off as much of the debt as possible before filing bankruptcy. Either way, you might be considering debt settlement as a potential solution.

WHAT IS DEBT SETTLEMENT?
Debt settlement is the process of paying a creditor an agreed upon amount to wipe out the remainder of your debt with that creditor. The amount paid is a lump sum smaller than the amount owed.

WHAT ARE THE RISKS?
Though there seems like nothing to lose by working down your debt through debt settlement, there are actually a number of risks you face.

  • Debt Settlement Company - If you do not wish to seek out settlement alone, debt settlement may be handled by a third-party company you hire. Debt settlement companies do not need to be accredited and do not guarantee a settlement. Therefore, there is some risk involved because you are paying for a service that may not gain any ground.

  • Incomplete Debt Settlement - There is also risk in attempting debt settlement because you may not be able to settle with certain creditors. Thus, after paying out what little money you have to settle certain debts, you still owe some debt that continues to wear down your credit.

  • Income Tax Liability - Any amount of debt written off by a creditor will usually count as income to you. Therefore, you would be liable to pay an income tax on the amount, even if you don’t have the money to do so.

  • Bad Credit - Most creditors need to be persuaded to settle with you. They will want a detailed report on your income and expenses. They will also look at your payment history. If you have a good payment history with them, they are less likely to settle because it appears that you can pay. Therefore, debt settlement companies will advise you to stop making payments. As you seek debt settlement, the lack of payments further hurts your credit.


BANKRUPTCY VS DEBT SETTLEMENT
As opposed to the potential risk involved in debt settlement, bankruptcy outlines exactly what will happen to you, your debt, and your credit. There’s virtually no risk involved.

Instead of hiring a debt settlement company, you hire an experienced bankruptcy lawyer to guide you through the process. There is never a half-cooked result. You will successfully file bankruptcy and get a fresh start. You will not have debts lingering from companies who don’t want to settle, because bankruptcy requires them to wipe your debt away. And debt that is discharged in bankruptcy will NOT count as taxable income.

No other financial process for debt relief comes close to Chapter 7 or Chapter 13 bankruptcy in effectively and quickly getting rid of your debt. That’s why I generally do not handle debt settlement, unless it is large dollar amounts to just a few creditors. Otherwise, it is just not cost-effective to hire an attorney to settle your debts.

If you want to know more about how Chapter 7 and Chapter 13 bankruptcy may give you a fresh start, set up an initial consultation with me. I am recognized as a debt relief agency, and provide bankruptcy relief using the laws of the State or Minnesota and the United States Bankruptcy Code. We will go over all of your options in detail and you will know right away whether or not bankruptcy can alleviate your financial stress. Call today at 651-454-0007!

Call Us Today 651-454-0007