Debt Settlement Attorney Serving in Carol Stream, St. Charles, and Chicago
The consumer bankruptcy attorneys at Johnson, Westra, Broecker, Whittaker & Newitt, P.C. help individuals and families find protection from aggressive creditors and relief from overwhelming debt through Chapter 7 and Chapter 13 bankruptcy. Debt settlement is sometimes considered as an alternative to bankruptcy, and while debt settlement can be effective in relieving burdensome debt in some instances, there are certain factors that should be considered before deciding to enter into debt settlement negotiations as opposed to bankruptcy.
How Debt Settlement Works
A debt settlement is basically a negotiated settlement where the creditor agrees to accept some amount less than the total amount owed as satisfaction of the debt. Why would a creditor agree to do this? Creditors know that if you cannot afford to pay your bills, you may decide to file for bankruptcy protection. If that happens, it is possible that the debt will be canceled out entirely, and the creditor will be left with nothing. Rather than take that risk, the creditor may agree to a lesser amount so they are not completely shut out from ever collecting the debt. Even if you do not file for bankruptcy, creditors know that the only way they can force you to pay is by litigating the dispute, prevailing at trial, and then going to the trouble to enforce and collect a judgment. This process can be costly and time-consuming for the creditor, and it may make more business sense to agree to a settlement out of court.
Why Bankruptcy is Better
The main reason bankruptcy is generally better than debt settlement is that bankruptcy often results in a complete discharge of the debt, as opposed to only reducing the amount owed. Even if a debt is not completely discharged in bankruptcy, the bankruptcy judge can reduce the amount of debt, the same as in a debt settlement. Another problem with debt settlement is that the terms of the settlement generally require that the agreed-upon amount be paid in one lump sum. If you are having trouble meeting your financial obligations, chances are you don’t have enough disposable income lying around to pay off a large debt all at once. Finally, if you are having trouble paying your bills to more than one creditor, you would have to negotiate a debt settlement with each creditor individually, and there is no guarantee that any or all of them would agree to a settlement. In bankruptcy, all of your creditors are brought together in one place and are required to submit to the plan approved by the bankruptcy judge, even if they don’t like it.
Get Advice and Representation in Your Bankruptcy or Debt Settlement from Experienced Chicago Area Bankruptcy Attorneys
Debt settlement may be a viable option if you are only dealing with one large creditor and have the means to pay off the debt in a lump sum. Be careful that you don’t overextend yourself doing so, however, and wind up without the resources to meet your other monthly obligations. If you are having trouble paying your bills, contact Johnson, Westra, Broecker, Whittaker & Newitt, P.C. to discuss your options. If debt settlement is right for you, we may be able to negotiate a favorable debt reduction on your behalf. If bankruptcy is the better option in your case, we are available to assist you through a Chapter 7 or Chapter 13 bankruptcy to help you get back on your feet and make a fresh start. Call our office at 630-665-9600 or contact us online for immediate assistance.