Chapter 13 Bankruptcy, Chapter 7 or Debt Settlement

Based on what I have witnessed recently, I would strongly encourage anyone thinking about entering into a debt settlement program to think about filing for bankruptcy first.

Bankruptcy will not be the best option for a few people, but for most people dealing with a debt problem, bankruptcy will be the best option.

Why? Because with many debt settlement programs, particularly those that don’t offer debt settlement overseen by an attorney, the debt settlement company may take thousands of dollars of fees before any funds paid by the client would be set aside for a settlement with the creditors. 

Even at that point it may take years to settle some debts in a non-attorney backed debt settlement program.  I’ve seen clients before they come to see me pay thousands of dollars to non-attorney backed debt settlement programs without having any of their debts paid.  

Now, one thing you might not have thought of is that not everyone qualifies for relief under Chapter 7 bankruptcy, and high income Chapter 13 bankruptcy clients might have to repay 100% of credit card debts in their Chapter 13 bankruptcy.  

Attorney-backed debt settlement for a single person with no dependents with  a six figure income and $10,000 in credit card debt would likely  be preferable to bankruptcy, whereas a single person with no dependents, $35,000 per year in income and $10,000 in credit card debt would likely be better off filing bankruptcy.

I do offer debt settlement services as alternative to bankruptcy for those for whom it is appropriate.  But I am careful not to recommend debt settlement for those who are better off filing for bankruptcy relief and vice versa.   

If you had a medical condition, you would probably want to explore the different types of treatment available for your condition and obtain the advice of a medical professional before choosing your treatment.  The same principles apply if you are dealing with a debt problem; you owe it to yourself to explore the different debt relief options so that you may choose the option which is best for you.