If you are in the unfortunate position of finding your debt getting out of hand, you may find yourself considering two entirely different options: bankruptcy and debt settlement. While on the surface debt settlement through a debt relief company may sound great, it is fraught with hidden perils that often remain unknown to consumers until it is too late. For this reason, you should always consult with a St. Petersburg debt relief attorney before engaging a debt relief company to help you manage your debts.
The Promise and Pitfalls of Debt Settlement
There are many companies out there that offer debt settlement. These companies, known as debt relief companies, often operate in a legal gray area. The debt relief companies make big promises, such as settling all of your debt for a fraction of the amount owed. While this seems great on the surface, there is more to it than simply paying and having the debt canceled. The debt relief company will ask you to make payments to it on a regular basis, and then they will use those funds to negotiate a settlement with your creditors and they will keep a portion of it as their fee. The debt relief company may encourage you to fall behind on your payments so that the creditor will consider you for a settlement. This is harmful to your credit score and credit report, as defaults can stay on your credit report for up to seven years. In the end, you may default on your debt and find that the creditor is unwilling to negotiate a settlement with you. Instead, the creditor may seek a court judgment permitting it to garnish your wages or place a lien on your property. Even if the debt relief company is successful in negotiating a settlement, your credit report will still reflect a charge-off or settlement for up to seven years.
A Better Alternative to Debt Settlement
A Chapter 13 bankruptcy is a legal remedy that can help you get your finances back on track. A Chapter 13 bankruptcy plan does not operate as a debt settlement. Instead, it is a repayment plan that allows you to make affordable payments to creditors over a period of three to five years. Common debts that can be included in a Chapter 13 plan include the following:
- Credit card bills
- Medical debt
- Car loans
- Personal loans
- Utility bills
- Past-due rent
This plan is proposed by you and your attorney, and if successful, will allow you to head off your debt before it spirals out of control. You can satisfy your debts without the risk of wage garnishment or property liens. Furthermore, depending on the amount of debt, a Chapter 13 bankruptcy is often a more economical option as all of your debt is taken care of in one go rather than piecemeal. Chapter 13 bankruptcy is also overseen by a court of law, so you can rest assured that attorneys offering Chapter 13 bankruptcy services are well-regulated, which cannot be said about debt relief companies.
Call the St. Petersburg firm of Berkowitz & Myer Today to Discuss Chapter 13 Bankruptcy
A Chapter 13 bankruptcy may very well be a better option for you than debt settlement if you are facing mounting debt. The attorneys at Berkowitz & Myer can advise you on all of your options and can determine whether a Chapter 13 bankruptcy is the right fit for you and your needs. Call the St. Petersburg law firm of Berkowitz & Myer today at (727) 344-0123 or contact us online to speak with an attorney about the solution to your debt.