How Effective is Debt Settlement?
If you have debts that you are unable to pay, you have choices that you can make to reduce your debts. One such option is debt settlement. Debt settlement consists of negotiating reduced debt with your creditors such as your credit card company. You may be able to reduce your debts between 20% and 80% by using debt settlement. Debt settlement may also be able to save you from having to file bankruptcy.
However, most consumers are intimidated with the thought of having to call their creditors and negotiate a settlement with them. Using an Indiana debt counseling lawyer to help you settle your debts with your creditors is an effective way to get your creditors to reduce your debt because they know that if you are working with an attorney, you are serious about resolving your debts with them.
How Debt Settlement Works
Your Indiana debt counseling attorney can help you negotiate reduced debt with your creditors. However, in most instances, you will need to pay the reduced debt off in full. So if you do not have the full amount to pay off your creditor, debt settlement may not be the best option for you. Also, keep in mind that debt settlement may have a negative impact on your credit score. However, paying your debts late or not at all, impacts your score even more. Also, the amount of forgiveness exceeding $600.00 is subject to federal income taxes so it is a good idea to talk that over with your Indiana debt counseling attorney first or your tax adviser before deciding to negotiate debt settlement with your creditor.
Debt Settlement vs. Bankruptcy
Another option to ridding yourself of debt is to file for bankruptcy protection. The difference between debt settlement and filing bankruptcy is that debt settlement allows you to keep your assets, does not have as much impact on your credit score and does not involve filing a proceeding with the court. However, filing for bankruptcy protection means your creditors can no longer try and collect a debt against you, sue you or obtain a judgment.
If you file for a complete liquidation under Chapter 7, you can eliminate your unsecured debts and start fresh again. If you have substantial assets, you may want to consider filing under Chapter 13, which is a reorganization plan that you enter into with your creditors reducing your debt. The debt is paid over a 3 to 5 year period. After you complete the court-approved repayment plan, your unsecured debts are discharged.
Seek Advice from an Indiana Debt Counseling/Bankruptcy Attorney
Making the choice to file for bankruptcy or use debt settlement is a complex one and should be discussed with an Indiana debt counseling/bankruptcy attorney. Also, working with an Indiana debt counseling/bankruptcy attorney gives you the peace of mind that you are making the right financial choices and that someone is looking out for your best interests.