It is easy, when you are in dire financial straits, to think that bankruptcy is the only option for relieving your debt burden. And for many, bankruptcy does provide financial relief. But bankruptcy comes with a potentially serious financial impact – a negative effect on your credit score.
There are alternatives to bankruptcy that can help you alleviate your debt burden and reduce and consolidate your debts, giving you a more optimistic financial future. Determining the right path for you depends upon the specifics of your individual financial situation.
Contact the Nevada bankruptcy attorneys at 702-DEFENSE to schedule a consultation.
What is a debt settlement?
A debt settlement, as the name implies, allows a debtor and creditor to reach an agreed-upon amount that, when paid by the debtor, will settle the debt for an amount less than would be required if the debtor were to repay the debt in full.
Creditors may be motivated to negotiate a debt settlement in order to avoid a scenario in which the debtor discharges the debt in bankruptcy and the creditor is left with nothing or very little. Despite the debtor’s potential ability to discharge the debt in bankruptcy, creditors are generally reluctant to settle a debt for significantly less than the full amount of the debt.
An attorney will negotiate on behalf of the debtor, talking with creditors and coming to an agreement that will settle the debt in a way that is favorable to the debtor.
Obtaining the counsel of an experienced attorney to negotiate a debt settlement can improve your chances of receiving a favorable settlement in a variety of ways. Attorneys are well-informed about the respective rights of creditors and debtors. That knowledge of the law gives attorneys places them in a better bargaining position when it comes to negotiating with creditors. Additionally, some creditors have policies that prevent them from negotiating directly with debtors, which restricts the debtor’s ability to reach a settlement without the help of an attorney.
A debt settlement agreement is not a magic bullet, however. Even if a settlement is reached, the debtor will be required to make regular payments over an agreed upon period of time or make a lump sum payment in order to settle the debt.
For many individuals, Chapter 7 or Chapter 13 may prove to be the best option for relieving debt. It is important for the debtor to be fully aware of the relative pros and cons of debt settlement and bankruptcy before choosing to proceed with either option.
Contact 702-DEFENSE to schedule an appointment to discuss your potential options.
What types of debts can be settled?
Some common forms of debt that may potentially be settled include:
- Medical Bills
- Utility Bills
- Credit Card Debt
- Private Student Loans
- Private Loans
There are, of course, other debts that may be settled. Contact 702-DEFENSE to discuss your settlement options for your specific debts.
Avoiding Debt Relief Companies and Other Scams
You may have heard advertisements from companies claiming they can consolidate your debt and settle your debts for pennies on the dollar. While settling your debts and consolidating debts are possible scenarios, frequently, these debt relief agencies are little more than scams.
Many debt relief agencies will advise you to cease all payments to creditors. Then, the agency will have you deposit certain amounts each month into an account for a period of up to 36 months. These payments can be onerous on the debtor and many will be unable to make payments for the duration of the program. Additionally, debt relief agencies often charge fees to manage these accounts, further straining the debtor’s already precarious financial situation.
Even if the consumer is able to make the monthly deposits into the account, the creditors are under no obligation to negotiate or settle debts with the debt relief agency. Therefore, despite the debtor’s diligence in making monthly payments to the debt settlement account, if the creditor is unwilling to settle a debt, that debt will still exist and will have accumulated additional interest during the duration of the debt settlement program.
Under a typical debt relief or consolidation program, the consumer will be encourage to cease payments to creditors. If, at the conclusion of the program, debts are left unsettled, this period of non-payment can have a negative effect on the consumer’s credit in the same way any non-payment of bills would. Late fees, interest, and other fees will also typically accrue during that period, further exacerbating the consumer’s financial situation.
Why should I hire an attorney?
Creditors have many legal avenues available to them to influence a debtor to repay debts. Creditors may sue the debtor for breach of contract, garnish the debtor’s wages, and place liens on the debtor’s property until the debt is repaid, and, as most debtors are aware, they can contact the debtor in an attempt to collect.
But debtors also have rights. There are strict regulations and laws regarding the techniques used by debt collectors and creditors when attempting to collect debts. The Fair Debt Collections Practices Act prohibits many unfair, abusive, harassing, and misleading techniques sometimes utilized in the debt collection industry. Debtors who have been subjected to these prohibited may be entitled to bring a civil lawsuit against creditors who violate these debt collection laws.
Attorneys have the distinct benefit of knowing the ins-and-outs of the laws surrounding debt and bankruptcy. An attorney will know what your creditors can and cannot do when it comes to collecting debts. Plus, an attorney will understand all of your rights as a consumer.
This extensive knowledge of the law gives attorneys a distinctly stronger bargaining position when it comes to negotiating a debt settlement with a creditor and levels the playing field between you and your creditors.
Which debt relief option is right for me?
Selecting the correct method of debt relief – whether bankruptcy or negotiating a debt settlement – has the potential to impact your financial future significantly. It is imperative that you weigh the pros and cons of each with an experienced attorney.
To discuss your individual circumstances and determine which path is best for you, contact the Nevada bankruptcy attorneys at 702-DEFENSE.