Denver Bankruptcy Lawyers Wink & Wink Can Help You Decide If Filing for Bankruptcy Is Right For You
On the surface, “debt settlement” may now sound nicer than “bankruptcy.”
Bankruptcy can connote images of failure, while debt settlement sounds almost peaceful. Your debt will now be settled…
But in reality, debt settlement can be much more stressful than bankruptcy because it can be much more expensive than bankruptcy and you can get sued while settling your debt. You may even still end up filing for bankruptcy, but now the cost of your debt relief is higher than it would have been had you filed bankruptcy from the start.
In fact, bankruptcy may be the smarter, better way to get much-needed debt relief so you can sooner get back on your feet again.
Let’s first understand what debt settlement is.
What’s Debt Settlement?
Debt settlement essentially means working out a deal with creditors – people or companies to whom you owe money – to get out of the debt for something less than the balance owed.
Let’s say you owe $20,000 to a creditor and are having trouble making payments. You’re often falling behind, and the creditor is growing increasingly angry. The harassing phone calls and letters are starting to arrive. To fix your situation, you could try to work out an agreement with the creditor to pay a smaller amount, say $10,000, and call it good. Some companies may be willing to accept that smaller amount rather than get potentially nothing or very little.
How Debt Settlement Works
Some people can negotiate a debt settlement agreement with the creditor themselves, while most need to hire a third-party debt settlement company to do so.
These debt settlement companies have more expertise and sway and are used to working with creditors. Plus, debt settlement agreements take time and skill. It’s not simply just dashing off a quick email and then the creditor replying with, “Sure.”
After hiring a debt settlement company to help you, they’ll try to negotiate a debt settlement arrangement with the creditor. They’ll also likely ask you to stop paying money to creditors and start putting that money into an account that they will control. As the money builds up, they’ll use it to pay the creditors. You can expect this process to take 24-48 months.
However, most debt settlement companies do not understand bankruptcy and will not recommend it to you, even if it is your most cost-effective debt relief option.
If you’re dealing with a tough financial situation and you need debt relief, it’s time to speak with an attorney who provides both debt settlement and bankruptcy representation, such as Wink & Wink of Denver, Colorado. They can review your case, explain your options, and help you come to an expert decision on what’s best for you.
Cons of Debt Settlement
Debt settlement can work for some people, but for many, the negatives far outweigh the positives.
- Certain creditors may demand more than 50% of the balance owed and a small number of creditors will not settle at all.
- A debt settlement company is ultimately a business. It is not a charity. They help you, while making money doing it. They may charge you approximately 15-25% of your debt (or a percentage of the amount you’ll ultimately pay the creditor) in fees. Say your debt is $10,000. You may owe an additional $1,500-$2,500 in fees just to the debt settlement company.
- The harassing phone calls and letters from creditors won’t necessarily stop.
- If you’re already in financial trouble, you may find it hard to make the monthly payments required to settle your debt.
- You’ll continue to accrue interest/fees/penalties on your debt. You may still be subject to legal action. You could still be sued.
- Debt settlement will still hurt your credit score, and it may take longer to repair it.
Why Bankruptcy Might Be Better
Bankruptcy is a way to eliminate most of your debt and get a fresh financial start.
- Bankruptcy can be fast. A bankruptcy can often be obtained within 6 months, while debt settlement can take years.
- You can sooner rebuild your credit after bankruptcy, while debt settlement can drag things out, making your creditor worse over time.
- When you file for bankruptcy, creditors are legally not allowed to contact you about late payments. The harassment must stop! Not true with debt settlement.
- Bankruptcy is through the courts, giving you a certain amount of legal protection and order. Debt settlement companies can more easily engage in poor business practices that exploit clients suffering from financial problems.
- A lot of people who start debt settlement can’t ultimately keep up with the payments and end up filing for bankruptcy anyway. This is almost always more expensive, time consuming and damaging to their credit than if they just filed bankruptcy from the start.
Consult Denver Bankruptcy Lawyers Wink & Wink Today
If you’re in need of debt relief, you’re probably desperate for answers as soon as possible. That’s why it’s important you speak with bankruptcy attorneys Wink & Wink of Denver. They can review your situation and see if filing for bankruptcy is the smart choice. A free consultation is only an email or phone call away. Call Wink & Wink today at 303-410-1720, or contact us online.