What is the Difference Between Filing for Bankruptcy and Debt Settlement?
A person cannot go more than a few days without hearing a radio or TV advertisement stating that some company can consolidate or settle your debts and negotiate with your lenders to obtain lower interest rates and payment terms. The truth is a lot of these companies are scams who collect your money and do nothing more. If you do decide to hire a company to settle your debts, you should make sure that the company is reputable and if possible, a law firm. If the debt settlement company does take action and negotiate your debts with your creditors, there is a very high likelihood that you will not be able to make your payments every month, resulting in continued harassment by creditors. The goal of debt settlement companies is to make your payments more affordable; however for many people this is not possible and they get no relief from their debt. If you do find a legitimate company who renegotiates your debts at a lower rate, you will be expected to make a single monthly payment, much like in a chapter 13 bankruptcy. In a chapter 13 bankruptcy you will only have to make payments for 3-5 years and in many situations discharge whatever you have not paid off at the end of the payment plan. A debt settlement plan does not allow for any sort of discharge prior to you paying off a high percentage of your debt.
Explanation from a Seattle Bankruptcy and Debt Settlement Attorney
Several of our clients have stated that debt consolidation programs have been nothing but a waste of money and they should have filed for bankruptcy in the first place. Here is an actual quote from one of our clients:
“The only time I stopped paying was when I went into the debt consolidation program which was the biggest mistake I ever made… what a joke.”
If you file for a chapter 7 bankruptcy with a bankruptcy lawyer, most, if not all of your debts can be wiped away and you can start fresh. A debt settlement program does not allow you to start fresh and you will continue to be haunted by a mountain of debt in which it is very likely that you will never get out from under the debt. If you have already signed up for a debt settlement plan and have made payments it is very likely that if you decided to file bankruptcy, a bankruptcy trustee would contact the debt settlement company and take back any money you have paid and apply that money to paying off your creditors should you file for bankruptcy. Contact the Symmes Law Group today for a free consultation at (206) 682-7975 and let’s discuss your options.