Bankruptcy vs. Debt Settlement: Which One is Right for Me?

Our AZ Bankruptcy Attorneys Explain What Would Be the Best Option Between Debt Settlement and Bankruptcy

By the time you are mired in debt and are dealing with non-stop calls and letters from your creditors, you don’t have a lot of options for dealing with your debt – unless you get a sudden influx of cash via the lottery or inheritance. One option is to file for bankruptcy and get some of that debt discharged or reorganize it under a new payment plan. Another option is to attempt to negotiate a settlement with your creditors for how much you can pay them.

You may be confused about the best option to take for your circumstances. It’s important that you talk to a bankruptcy lawyer in Tucson to get legal advice about your options for debt relief, but you should also consider these pros and cons of debt settlement and bankruptcy:

Debt Settlement

By the time creditors are sending you a lot of letters and making a lot of phone calls, they know that you are having a hard time paying. And they know that chances are good that you may not pay the full debt – or may not pay at all. They have an incentive to negotiate with you to pay a lower price to satisfy the debt.
Under a debt settlement, you may pay a lower amount or may pay a lower interest rate. Either way, you save money. That is the biggest advantages. Other advantages include getting a solution for your debt without having to hire an Mesa bankruptcy attorney or other professional and without having to file for bankruptcy.

The cons of a debt settlement is that it is so uncertain. Creditors are not always willing to negotiate with you, and they may not believe that you are unable to pay. They may make you jump through hoops proving your financial problems, including submitting W-2s, bank statements, and more. Your creditors may also require you to liquidate any assets you have before being willing to write off any of your debt.
If the creditor does agree to accept less for your debt, it will likely write off the loss on its taxes. It will then issue a 1099-C to you, which will count as income for you. You will then have to pay more taxes, which can only exacerbate your financial problems.

Overall, there are far more potential cons to attempting to negotiate a debt settlement with your creditors than there are advantages.

Bankruptcy

If you file for bankruptcy, you are seeking debt relief under the law. You aren’t asking your creditors for permission. If you file for Chapter 7 bankruptcy, you can get all of your unsecured credit discharged. If you file for Chapter 13 bankruptcy in Mesa, you can get your debt reorganized under a new payment plan, which can include a smaller amount or a lower interest rate. That plan will be determined by the courts, not your creditors.

The pros of bankruptcy are that you can have your debt completely eliminated or significantly reduced, and you don’t have to deal with your creditors at all. Bankruptcy also issues an automatic stay, which will put an immediate end to any contact by your creditors, as well as any legal action that they are bringing, such as wage garnishment. You can finally get control of your finances and breathe easy again.

Many people fear that bankruptcy will be a blow to their credit. While it is a black mark on your credit, it can actually be helpful to your credit since it can put an immediate end to your debts and start the clock on your new financial life, rather than allowing high debts and delinquencies to follow you around on your credit history.

There really is no disadvantage to bankruptcy if you are struggling with debt. You may have feelings of shame or embarrassment because of the stigma that comes from misinformation about bankruptcy. However, you should remember that bankruptcy is a legal program that is designed for people exactly like you who are struggling with debt, and taking advantage of that program is your right. There is nothing to be ashamed about getting the help you need. In fact, it’s just good financial sense.

Call My AZ Lawyers today to learn more about bankruptcy and how it may benefit you. Our bankruptcy attorneys are experienced and knowledgeable, and they are committed to helping you through the process with compassion. They will analyze your finances and help you understand whether Chapter 7 bankruptcy or Chapter 13 bankruptcy would provide the most benefits, based on your goals. Then they will work to help you get the debt relief you need, as quickly as possible. Our bankruptcy law office serves clients in Mesa, Glendale, Tucson, and Phoenix. Call us today to schedule an appointment.

Arizona Offices:

Mesa Location:
1731 West Baseline Rd., Suite #100
Mesa, AZ 85202
Office: (480) 448-9800
Email: info@myazlawyers.com
Website: https://myazlawyers.com/

Glendale Location:
20325 N 51st Avenue Suite #134, Building 5
Glendale, AZ 85308
Office: (602) 509-0955

Tucson Location:
2 East Congress St., Suite #900-6A
Tucson, AZ 85701
Office: (520) 441-1450

Avondale Location:
12725 W. Indian School Rd., Ste E, #101
Avondale, AZ 85392
Office: (623) 469-6603