Debt Settlement

Why Bankruptcy Is the Better Option

In our more than 30 years of experience working alongside clients overwhelmed with debt, our Kansas City bankruptcy lawyers are often asked about the pros and cons for two of the most common methods for relieving debt — bankruptcy and debt settlement. Many individuals considering bankruptcy or debt settlement also bring concerns over how it will affect their credit scores, as well as which method will help their credit heal the fastest.

It’s important to consider that each financial situation is unique. Consequently, the type of bankruptcy or form of financial relief that’s right for you depends on several factors. Our firm finds that most individuals who come out of a bankruptcy have a better chance of maintaining their credit scores and more opportunities to rebuild their credit, as opposed to individuals who pursue settlements of their debts. Perhaps most important is the fact that settled debts can result in the issuing of 1099 forms for income due to forgiven or cancelled debts. You avoid this result with bankruptcy.

There are many advantages to a Chapter 7 bankruptcy or Chapter 13 bankruptcy if you qualify to file, in contrast to debt settlement. These advantages include:

• Filing for bankruptcy can stop all litigation that is pending against you, such as a home foreclosure or car repossession. This does not occur with a debt settlement, in which creditors may continue to pursue a lawsuit against you for the debts you owe.
• All creditors must participate in a bankruptcy. Unlike debt settlement companies, federal court supervises the proceedings of a bankruptcy. In a debt settlement, creditors do not have to cooperate or agree to any offer or settlement.
• Debt settlement fees and costs can add up quickly and often end up costing a client far more than the fees for a Bankruptcy filing.
• The IRS does not consider any debt forgiven in a bankruptcy to be taxable income. If a creditor forgives a portion of your debt during a settlement, as referenced above, there will be tax implications on the amounts forgiven.

To learn which method is the best for your situation, talk with a bankruptcy lawyer during our free phone consultation. Then we can decide if bankruptcy is right for you. Sader Law Firm, LLC can even file your bankruptcy case quickly, within one to two days. Additionally, we can assist those looking to file an emergency bankruptcy filing.

Our firm will give you an honest assessment of your financial situation and take the time to answer your questions. We will recommend the most beneficial route you have to resolve your debt. Debt settlement companies will either discourage or not discuss bankruptcy as an option since it is not a service they can provide.

We want you to be aware of what options are available and feasible for you after listening to your concerns. As a bankruptcy law firm, since 1997 we have assisted individuals and families in getting the solutions they need to bring their debt under control. Learn more about your options by contacting our attorneys today for a no-obligation consultation.