Tag: Debt Settlement

Debt Relief

The Downsides of Using a For-Profit Debt Settlement Company

Posted on by Admin

Carrying large amounts of debt is stressful, which is why many people turn to debt settlement companies to fix the problem. However, it pays to use caution when seeking solutions with consumer debt. Countless for-profit debt settlement companies exist, offering deals that seem too good to be true, hoping that they will be able to entice a consumer to use their service. Consumers who hire a for-profit debt settlement company often find there is more risk than reward.

Debt settlement companies are easy to find, whether on the internet or on TV commercials. We have all seen them.  These companies use lines such as– “Settle your debt for less than you owe”, “We work with your creditors to reduce your monthly payments,” etc.

Credit Card Debt, Debt Relief, Medical Debt

How to Handle Debt in Retirement

Posted on by Admin

For many Americans, including those entering retirement, being in debt is a way of life. According to numbers published by the Transamerica Center for Retirement Studies, four in every 10 retirees report getting out of debt as a top priority. Many of them are struggling to the point where bankruptcy is their only way out. In fact, the Consumer Bankruptcy Project reports that one in every seven bankruptcy filers is over the age of 65.

One of the reasons why seniors are struggling financially has to do with living on a fixed income. All it takes is for one medical crisis to strike to set them back significantly in their financial goals. The hopes of entering retirement debt free can be difficult for those carrying large amounts of credit card debt and student loan debt. It also does not help that larger companies cut back or even took away pensions for American workers who pinned their hopes of retirement on these plans.

Credit Card Debt, Debt Relief

How to Protect Your Wages from Credit Card Companies

Posted on by Admin

A credit card company can garnish a person’s wages following a successful judgment, which is why it is important to not ignore collection attempts. While it can be hard to fight wage garnishment after it is entered, consumers do have options to protect themselves in the event this does occur.

Settling the Debt

One of the best ways to avoid a wage garnishment is to work directly with the credit card company or debt collector. Many times, the company may be willing to work with the consumer rather than go through the effort and spend the legal fees to take them to court.

They may require the consumer provide some type of proof that his or her financial situation is solid enough to handle the settlement amount. If the debt is large, they may require some type of security to ensure payment will occur.

Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

What to Do if Your Medical Bill Gets Sent to Collections

Posted on by Admin

Medical debt is an issue that plagues many Americans. It only takes one major medical crisis to set a person back hundreds, even thousands of dollars. According to the Kaiser Family Foundation, one in every three Americans report having difficulty paying their medical bills. As a result, a number of these individuals end up having their medical bills go into collections.

If you are one of the millions of Americans struggling with medical debt, remember you are not alone, and you do have options.

Negotiating a Settlement with Service Provider or Debt Collector.

If the debt has not been officially sent to a third-party debt collector but is being collected by the original service provider, the consumer can often work directly with that company to negotiate either a payment plan or settlement of the debt owed. The same could be said for if the debt has been sent to a third-party debt collector, although the entity contacted to negotiate on the debt will be different. This settlement can be done through three different possible methods including:

  • Reduced lump sum payment;
  • Percentage of debt payment;
  • Payment plans.

A lump sum payment is a common method used so long as the person has enough money to pay a large amount. The debt collector often would rather have some level of payment rather than nothing at all, so they will often take a lump sum payment to close the account, although the amount owed may be slightly less than what is paid. Many times, this method is preferred because the creditor or debt collector would rather receive a large lump sum of money immediately instead of keeping the negative account on the books or having the consumer file for bankruptcy where the debt would be discharged.

While very similar to a lump sum payment, some creditors will accept a specific percentage to pay off the debt, such as 25 to 30 percent, while forgiving the remainder owed. However, this type of settlement depends heavily on the balance. If someone owes a small balance, the percentage the creditor will accept may be much higher than the percentage of a large balance. Additionally, if the person is suffering from a financial hardship, the creditor may be more willing to work with that person on a percentage payment. Also, if there is a strong threat of bankruptcy, the creditor may accept a lower payment rather than get nothing through a bankruptcy discharge.

Many medical providers will work with the account holder on payment plans if they are not able to pay the bill off in full right away. However, these agreements need to be worked out timely and not after missing several payments, causing the account to go into default. Both parties must agree on an amount and the terms of the payment plan.

Get any Agreement in Writing.

Whatever settlement is worked out between the creditor/collector and consumer, it is important that this agreement be documented in writing. Without a firm commitment on the amount agreed upon, the consumer will have nothing to hold the collector to in the event they dispute the arrangement. It also gives the consumer something legally enforceable in the event the agreement falls through.

Payments Made but Still Sent to Collections.

The unfortunate fact is even if the consumer is making payments on the debt, the unpaid balance can still be sent to collections. Ultimately, it is a business decision that is made by the medical provider (i.e. – doctor’s office, hospital or dentist). How they handle the account depends on many factors, including how large the balance is, how much is being paid monthly, and how long it will take to finally pay off the amount owed. For example, if the individual owes $15,000 and is only making $10 per month payments, the provider may ultimately find that this is not going to work and could send the claim to collections, even though the $10 monthly payments are being made. This action can be much harder to accomplish if the parties have a written payment agreement, which is why it is extremely important that the payment arrangement be in writing.

Refusal of a Payment Plan.

It is always possible that a medical provider will refuse a payment plan. They are not legally obligated to work with the customer on a payment arrangement. For the most part, medical providers will work out payment arrangements out of goodwill, but if the person asking for the payment plan has failed several times before, they are not legally obligated to work out an agreement. The same goes for a collection agency. However, collectors do often work on commission, and because of this, they will often accept a payment plan that will pay off the obligation quickly, closing the account, and getting them paid.

How Medical Debt is Handled in Bankruptcy.

In bankruptcy, medical debt is treated the same as credit card debt. Medical bills are listed as general unsecured debt and can be easily wiped out in a Chapter 7 bankruptcy filing.  Making the decision to file for bankruptcy is never an easy one.  It can be difficult to get past some of the myths associated with filing for bankruptcy. Sometimes by waiting, an individual facing a lot of debt can find himself or herself in an even worse situation. Filing for bankruptcy can help protect valuable assets, including your home, car, IRA and social security.  It will put an end to wage garnishment and any lawsuit being filed to collect on the debt, thanks to the protections of the automatic stay.

Those who have experienced illness or injury and found themselves overwhelmed with medical debt should contact an experienced Miami bankruptcy attorney. In bankruptcy, medical bills are considered general unsecured debts just like credit cards. This means that medical bills do not receive priority treatment and can easily be discharged in bankruptcy. Bankruptcy laws were created to help people resolve overwhelming debt and gain a fresh financial start. Bankruptcy attorney Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Related Resources:

https://www.inquirer.com/health/consumer/challenge-medical-bill-debt-collection-tips-20190610.html

https://www.growingfamilybenefits.com/negotiate-medical-bills-settle/

Bankruptcy Law, Credit Card Debt, Debt Relief, Timothy Kingcade Posts

The Top Ways To Get Out Of Debt

Posted on by Admin

Debt is a weight that can drag you down and make you feel like you are drowning without any way out.  Having extreme debt can affect your health, happiness and personal relationships.  Getting out of debt can be an even bigger struggle, if you do not devise a plan that works for your specific situation.

Debt Consolidation

One popular method of paying off debt is through debt consolidation. What consolidation means is the consumer’s debt is combined into one, single debt amount owed. Debt consolidation can be done through many different methods. A consumer can apply for a personal loan or consolidation loan to pay off all of the debts with the monies from the loan. This method allows you to only make one payment to one creditor rather than multiple creditors.  With this method, we strongly advise that you do your research. Not all debt consolidation companies are reputable, and it is important you understand the terms of the loan before signing on the dotted line. For most debt consolidation loans, you need good credit to be approved. If you are already struggling financially, many lenders will see you as a risky bet and will avoid lending to you without a co-signer or at least some collateral to secure the debt.

Credit Counseling

Many different credit counseling resources exist, and they usually involve a professional counselor who will work with the debtor on understanding his or her financial situation and researching possible options to get out of debt. Credit counselors often will work with the individual to organize and manage their debt, and the counselor will also contact the debtor’s creditors on payment arrangements, including creating payment plans or negotiating lower interest rates. Credit counselors can also put together a debt management plan that allows the debtor to make lower monthly payments through the debt counselor who, in turn, pays the individual’s creditors.

Like debt consolidation companies, it is important that you do your due diligence in choosing a credit counselor. Less-than-reputable agencies do exist, so make sure you choose someone who has your best interests in mind. Know that a credit counselor cannot make certain promises, such as guaranteeing that your creditors will work with them or that they will be able to directly reduce your debt. While they can certainly work towards that goal, lenders are not obligated to work with credit counselors. If a ‘credit counselor’ is promising you this or telling you that they can completely eliminate your debt by having you pay a low monthly payment to them, this is a BIG red flag.

Debt Settlement

Another potential option for paying off debt is through debt settlement. This process normally involves a third-party company that works with a debtor’s creditors to allow the debtor to pay a lower amount than what is owed. However, with this option the likelihood of scams is very high. Many of these companies have been reported for taking the debtor’s money and never negotiating on the debt. Additionally, debt settlement can result in a person’s credit taking a rather serious hit due to the fact that the debtor will normally have to stop making payments to the creditor, pushing the accounts into default. Unless the creditor agrees to work with the debt settlement company, a judgment can easily be issued against the debtor, resulting in wage garnishment to satisfy the debt.

Filing for bankruptcy

Debt can be complex and oftentimes frightening to deal with. Many times, people are hesitant or feel ashamed to ask for help. However, not properly dealing with debt can only make problems worse. Rather than run the risk of being sued by a creditor or have your wages garnished, it is best to deal with your debt head on. There are a number of debt relief options available, including filing for bankruptcy, which can completely wipe out unsecured debts like credit cards, medical bills, personal loans and more- and give you a fresh financial start. Exploring these options with the guidance and support of an experienced attorney can help you make the right decision.

Do not let your debt cost you another sleepless night. Here are some of the signs that bankruptcy is right for you. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. The consultation is free, the relief is real! You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

 

 

Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

Understanding the Risks Associated with Debt Settlement

Posted on by Admin

Carrying large amounts of debt can be debilitating. It can affect every aspect of a person’s life, to the point where you would do just about anything to find a way out. So, if someone approaches you with an offer to reduce or eliminate your debt for less than the full amount you owe, it can seem too good to be true, right? The problem is, with debt settlement, it usually is. It is important to understand the risks associated with debt settlement.

The Process Is Not Quick.

One thing many debtors do not fully realize is the process of debt settlement is not actually quick. In fact, it can take anywhere from months to years to be completed. The first step is to accumulate enough money to offer a settlement to creditors. You first must enroll in a settlement program with a debt settlement company. The company opens a type of savings account to gather funds that you pay them monthly to use towards settlement offers. The debt settlement company will normally instruct you to pay them instead of your creditors. After you have reached the threshold determined by the company to begin making payments for creditors, the debt settlement company will negotiate with your creditors and collectors, if accounts have gone into collections, on a settlement. The company will use the money in your “savings” account to make these payments. This process can take anywhere from 12 to 48 months, depending on how much you owe and the monthly payments you are able to make.

Your Credit Score Will Take a Hit.

One major problem a with debt settlement program is the hit it will make to your credit score. For one, if your debt is successfully settled, your account status will read as “settled in full” instead of “paid in full,” which is less favorable on a credit report. Additionally, if a debt is settled, this mark will stay on your credit report for seven years from the date of final discharge or settlement of the debt. However, even more significant than this issue is what happens when you suddenly stop paying your debts. You take the risk that your creditors will put your accounts into past-due status or even turn them over to collections if you do not pay on them for more than 30 days. You assume that these debts will eventually be settled and cleared, but the damage that is done to your credit report in that time period can be quite significant.

Settlement Fees Are High.

Debt settlement companies do not perform this work out of the goodness of their hearts. After all, they are ‘for profit’ businesses, so they are performing this service with the intent of making money. Most of these companies charge a settlement fee that is either based on a percentage of the total debt settled or a flat fee taken at the end. According to a Federal Trade Commission (FTC) rule enacted in 2010, no debt settlement company can require a fee be charged upfront before settling or reducing a person’s credit card or other unsecured debt. They must be taken at the end. The fees can be high, however, so that can be a negative aspect to proceeding with debt settlement.

Do Creditors Have a Motivation to Settle?

Another problem with debt settlement is the fact that creditors have little motivation to settle the debt. They are under no obligation to work with the debt settlement company, and the debt settlement company cannot guarantee that their negotiations will be successful. In fact, if a company tells you that they guarantee they will be able to reduce or settle your debts, this statement should raise a red flag that the company may not be legitimate.

You can also negotiate with creditors on your own. You do not need to rely on the assistance of a third-party company to negotiate a lower payment on your debts or a lump sum reduction in what is owed. You will save yourself the fees that come along with working with a debt settlement company and can just as easily accomplish what you are trying to accomplish when retaining a debt settlement agency.

Debt Settlement or Bankruptcy?

Many times, debt settlement is simply avoiding the inevitable. You can spend years working with a debt settlement company to pay down a debt that would otherwise be liquidated in a bankruptcy case. If you are struggling to pay mostly unsecured debt, which includes personal loans, credit cards, and medical debt, this debt is what is normally discharged in a Chapter 7 or Chapter 13 bankruptcy case. With a bankruptcy filing, you get the benefit of an automatic stay, which essentially puts all collection matters on hold until the bankruptcy case is completed. If you choose to proceed with debt settlement first, you do not get this protection, and many of your accounts that would otherwise be liquidated in bankruptcy will go into collections or even be brought to a judgment, resulting in a wage garnishment against you. The result is you will take a significant hit to your credit score and pay monthly payments to a debt settlement company to negotiate on a debt that you would otherwise be able to discharge in a bankruptcy case. It may be more practical to proceed with the bankruptcy instead of other options, especially if the majority of your debt is unsecured. An experienced bankruptcy attorney can review your situation and discuss possible options that are available for handling the debt and eliminating it.

Please click here to read more.

If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

 

 

Debt Relief, Timothy Kingcade Posts

Simple Steps to Help Reduce Your Debt

Posted on by Admin

Debt can cause a lot of problems in life. It can not only cause damage to your credit score, but it can also affect your emotional well-being, even your relationships.  It can make the person feel like he or she is drowning with no possible relief in sight.  Given the 126.2 million American households, the average household has around $8,161 in revolving debt, approximately $6,577 of which is credit card debt. With nearly 248 million Americans over the age of 18, that comes out to a total of $3,353 in credit card balances per US adult, according to cardrates.com.

Here are some steps to take to help manage and reduce your debt.

Step 1: Review Your Debt

The first step is to take an inventory of what type of debt you owe. This inventory can be done by creating a master list of what all is owed, from credit card debt to loans to medical bills. A person’s credit report can be the best source for getting a clean list of what is owed. For this list, write down the name of the creditor, how much owed on each bill, the minimum monthly payment, the payment due date, and the interest rate on the debt. This list will give you a good picture of what all is outstanding and how to then attack the debt.

Step 2: Decide How Much Can Be Paid

The next step before conquering the debt is to put together a monthly budget and decide how much can be paid towards the expenses. Add up all of your monthly costs, including living expenses, car, food, utilities, and any minimum payments on debts. Make sure to leave some wiggle room for unexpected expenses, such as emergencies that may arise. The remaining amount on your budget should be what you can put towards your debt repayment plan every month.

Step 3: Contact Creditors

Once you have determined how much you can pay towards your outstanding debts, the next step is to reach out to your creditors to discuss repayment. Many lenders are more than willing to work with debtors on a repayment plan or to even lower interest rates on outstanding obligations. See if any of them will negotiate with you on a debt repayment plan or will settle the debt for a flat amount. However, be cautious when negotiating debt settlement with third-party agencies, as scams exist to take advantage of those looking to get out of debt.  If you cannot afford to pay the debt, tell the debt collector that.  Never promise to pay an amount you cannot afford and never provide them with your bank account and routing information.

Step 4: Attack One Bill at a Time

Looking at all of those debts can seem daunting, but the best method is to often tackle one bill at a time. Taking the bill with the highest interest rate or the one with the smallest balance is best. By taking on the card with the highest interest rate, you can save yourself a great deal of money on interest payments. However, taking the smallest debt first can help give you some momentum in that you will feel a sense of accomplishment after paying off a debt completely in full. Once that first debt is tackled, take on the next debt and so on, until all of the outstanding debts are paid in full.

Step 5: Keep Paying on Other Bills

While you are paying off the targeted bill, it is important that you continue paying the minimum monthly payment on the other debts. In addition, keep paying the full amount that you decided would go towards your debt in your prepared budget. As you eliminate debt, simply put that extra money towards another debt, taking the snowball effect. This tactic will make it possible for you to pay off your debt quicker than you would if you only made the minimum payments on all of the accounts.

Step 6: Be Creative with Your Options

Staying disciplined to your plan is the best method for attacking the debt, but it also helps to be a little creative. For example, use your annual tax refund or a job bonus to pay down the debt or enlist the help of an experienced bankruptcy attorney to eliminate the debt. Try to come up with extra ways to earn money and use that extra income to go towards paying down debt.

As bankruptcy attorneys, we see credit card debt as one of the most common problems facing those with serious financial difficulties.  It is not surprising with the high interest rates, unreasonable fees, harassing debt collection calls, penalties and never-ending minimum payments that do not even begin to make a dent in the actual debt owed. We offer additional tips for eliminating credit card debt on our blog.

Click here to read more.

If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

 

Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

Generation X Carries Most Debt Out of All Generations

Posted on by Admin

Debt presents a problem for many Americans today, but one generation clearly stands out among the rest in terms of holding the most consumer debt. In fact, according to a recent study published by LightStream Survey conducted by the Harris Poll, nearly 80 percent of all members in the Generation X, ranging from ages 36 to 51, have some level of debt. The report showed that eight in ten members in this age category carry debt.

Coming in just below this were members of the Millennial generation, consumers between the ages of 20 and 35. Approximately 75 percent of all members in this age group carried debt. The next group was the Baby Boomer generation, which includes individuals between the ages of 52 and 70, with 69 percent of them carrying some type of debt.

While all three of these generations carry debt, it is the mindset of those in the Gen X category that presents the most cause for concern. Those surveyed in Gen X reported that they felt it was impossible to pay off a significant debt once it was incurred. Additionally, 25 percent of those in this demographic reported that they were not confident in how they were handling their finances. However, in the survey data, these individuals did state that they would be willing to give up hobbies or extracurricular activities to get rid of their debt payments, which does show some promise.

On average, individuals in Generation X carry $30,334 in “non-mortgage debt.” In comparison, Baby Boomers hold $27,513 and Millennials hold $22,784 in non-mortgage debt.

Getting out of debt can also be problematic for individuals in this generation, as well. Those who are younger may be able to use their savings or cash in their investments to reduce their debt, but it may be too difficult for Gen X members to dip into their retirement savings to pay off debt.

If you are struggling with insurmountable debt, dipping into retirement savings is never advisable.  These are protected in bankruptcy along with the following bankruptcy exemptions in Florida. Many individuals are already struggling to pay for obligations, including helping aging parents as well as adult children. While they are not quite at the age of retirement, they are approaching that point, making it too close for comfort to use retirement savings.

Continuing to struggle with debt is a slower, less effective way to pay it off.  Many different debt relief options exist, including debt consolidation, debt settlement or negotiation and bankruptcy – but it is important that as a consumer you research your options carefully.

Click here to read more.

If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

 

Credit, Credit Card Debt, Debt Relief, Timothy Kingcade Posts

The Truth About Credit Card Debt Forgiveness

Posted on by Admin

The thought of having your credit card debt completely forgiven can seem too good to be true. However, like so many things in life, if it sounds too good to be true, it probably is. The truth is, debt settlement comes with its own set of unintended consequences.

If a consumer is not able to pay off a credit card balance and has missed a number of payments, that person may choose to either work directly with the credit card company- or if the debt is sold, a third-party debt collector to settle payment. Credit card companies want to receive payment at the end of the day, and they are willing to accept less than what is owed in lieu of not receiving payment at all if the debtor chooses to file for bankruptcy and have the debt discharged.

The problem with debt settlement involves the consequences that come along with settling your credit card debt. For one, even if the balance is settled, it can still have a negative impact on a consumer’s credit score. In addition, if the amount that originally was owed is a lot more than the amount that ended up being paid, the difference is still considered taxable income by the IRS and state government, which means the consumer will have to pay taxes on the forgiven debt.

If you are successful in negotiating the amount with the creditor, make sure these agreements are in writing and be wary of any plans that seem too good to be true.  If you are receiving collection calls, unable to make payments, facing wage garnishment or have a lawsuit pending with a creditor, it is important to at least sit down with an experienced bankruptcy attorney, who can advise you of all your options.

Consumers should avoid working with debt settlement companies.  The cons often outweigh the pros, as many of these companies engage in unfair practices, require their clients pay large upfront fees and result in a consumer’s credit being irreparably damaged, and still left with debt.

Click here to read more on this story.

If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

 

 

 

Bankruptcy Law, Credit, Debt Relief, Timothy Kingcade Posts

Debt Settlement vs. Filing for Bankruptcy: The Pros and Cons

Posted on by Admin

If you are having trouble affording your monthly expenses and are in over your head in debt, you may consider reaching out to a debt settlement company to alleviate some of the burden.  The commercials are appealing enough, touting promises of getting your debt negotiated with the lender for a fraction of what you owe.

Here’s how a debt settlement works and some of the risks involved:

The process starts by explaining your financial situation to the debt settlement company. You provide the names of the creditors and the amount you owe. The debt settlement company then gives you an estimate for reducing your debt along with a new lower monthly payment. As advised by the settlement company, you stop paying your creditors and instead send payments directly to the company.

The debt settlement company puts your monthly payments into a savings account. Once the account has grown to a certain amount, the debt settlement company calls your creditors and begins negotiating a settlement.  If the creditor agrees to a settlement amount, the settlement company pays the creditor and assesses a fee for the settlement.

Creditors typically do not settle debts until they are a few months past due, which means if you have not already done so you must stop paying on your accounts and allow them to become past due.  During this time, late payments will be reported to credit bureaus, your credit score will drop and you will begin receiving collection calls.  Late payments will remain on your credit reports for up to seven years and during this time you will have difficulty qualifying for new credit.

Debt settlement companies typically tackle the smallest debts, first which means your larger debts will continue to accumulate interest and additional fees. Add all that interest you are accumulating to the fees and you do not really end up saving much.  If you are unable to meet the terms of the debt settlement, ignore the debt or try and repay the debt and ultimately fail you run the risk of being sued.

Many consumers who have researched debt settlement options should also consider Chapter 7 bankruptcy, which erases credit card balances, medical bills, personal loans and other unsecured debts in three to four months.  Filing for bankruptcy will impact your credit score more than a debt settlement, but it legally erases the debts and prevents creditors from filing a lawsuit against you.

If you have any questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Related Resources:

https://www.thebalance.com/the-dangers-of-debt-settlement-960622

http://www.latimes.com/business/la-fi-montalk-20171001-story.html