BANKRUPTCY VS DEBT SETTLEMENT
It is often incorrectly assumed that if you have a lot of debt it is because you must have a spending problem. This assumption could not be farther from the truth. In fact, most debt is a result of some sort of a medical issue. This includes: medical expenses due to injury or illness not covered by insurance; missing extended periods of work due to injury or illness (which often starts a chain reaction that gets you very far behind on your bills); being terminated from your job for missing too many days due to injury or illness; and finally not being able to work at all long-term due to injury or illness.
Our office has seen clients who have not a cent of credit card debt. As well as clients who have nothing but credit card debt but also nothing to show for it: no new televisions, no fancy jewelry, etc. How can that be? This is because they were forced to “live off” of their credit cards due to illness, injury, loss of employment, or perhaps even a divorce. With little money in their bank account, the paid rent, the electricity bill, gas bill, groceries, car insurance, and so on with their credit cards and saved the little money they had to make the minimum monthly payment on the credit card with the hope of getting it paid off once they got back to work, or the injury healed, or the divorce finalized, etc.
Debt Settlement is an option and how it works specifically is discussed in our Debt Settlement article. The trouble is that Debt settlement is a short-term solution with some pretty rough consequences, and the settlement is on a case-by-case basis with one creditor at a time. So let’s say you are able to settle with the Emergency Room but your credit card company refuses to offer you anything you can manage or anything at all.
Bankruptcy, on the other hand, involves all your debts. Furthermore, it can wipe away most, if not all, of your debt. You do not have to count this wiped-out debt as income and pay taxes on it as you would in a debt settlement. Your creditors do not have the option of refusing to work with you as they do in a debt settlement. Depending what Chapter [Difference Between Chapter 7 & 13] you end up filing, you may be able to walk away from your debts for little to no money compared to what you owe.
Bankruptcy does have its drawbacks, though. One is that it will damage your credit but so will Debt Settlement as your creditors will report to the credit bureaus that you did not pay all of your obligation.
If you are interested in finding out more about Debt Settlement and Bankruptcy and also want to learn which one would be best for you call RS Law for a free consultation TODAY.