Should I Settle My Debt or File for Bankruptcy?

 Posted on February 13, 2023 in Debt Relief

Each year, thousands of Americans file for bankruptcy. Given how beneficial bankruptcy can be under certain circumstances, it is not difficult to understand why so many people choose to take advantage of this opportunity.

However, filing for bankruptcy is not the only debt relief option available for those who are struggling to consistently meet their financial obligations, nor is bankruptcy the best option for certain situations. As a result, it is important for debtors who are struggling to carefully review various debt management opportunities before determining which one(s) make the most sense for them.

For example, you may have heard about the potential benefits of debt settlement. Depending on your unique circumstances, settling your debt may or may not be a better choice than filing for bankruptcy.

Debt Settlement

The debt settlement process can be helpful if you can pay a large fraction of your balance at once in exchange for relief of the remainder. For example, if you are past due on a medical account that has a balance of $5,000, the provider’s billing office may allow you to pay $3,500 at once in exchange for closing your account.

You can work with an attorney to pursue a debt settlement arrangement, or you can negotiate directly with a creditor. Note that this option will hurt your credit score and that creditors are not obligated to honor a request for debt settlement.

Filing for Bankruptcy  

Filing for bankruptcy is generally a good idea when someone is struggling with multiple debts and/or does not have the resources to make the debt settlement process work for them. Chapter 7 bankruptcy is an excellent option for low-wage filers. Chapter 13 bankruptcy allows filers of all income levels to reorganize their debts and pay them down in manageable installments over three to five years.

Additionally, the benefits of the automatic stay – which is unique to bankruptcy law – can halt collection action, wage garnishment, and even stop foreclosure. If your financial situation is complex and a single lump-sum settlement for a single unsecured debt is not going to do the trick, filing for bankruptcy is probably a better choice.

Contact a Knowledgeable San Antonio Bankruptcy Lawyer Today for Personalized Feedback

It is not always easy to know which debt management option(s) may best serve any particular financial challenge. Know that if you remain unsure about whether you would benefit most by filing for bankruptcy, settling your debt, or exploring a different bankruptcy alternative, the knowledgeable San Antonio, TX bankruptcy lawyers at Law Offices of Chance M. McGhee can help you to evaluate your options in accordance with your unique financial goals and circumstances.

We would be happy to provide you with personalized, objective guidance during a risk-free, no-cost, confidential, initial consultation. We are proud to offer free case evaluations because our team believes that everyone – regardless of their ability to pay – deserves to understand their legal rights and debt relief options. Consider scheduling a no-cost consultation today. We can be reached via our online contact form or by calling 210-342-3400. We look forward to speaking with you.

Sources:

https://www.forbes.com/advisor/debt-relief/debt-settlement-how-it-works-and-risks/

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics