Bankruptcy Alternatives Have Multiple Downsides
The economic downturn that has swept the country has left more Americans in financial straits than at any other time since the Great Depression. In such conditions, vast numbers of people have fallen behind on the payments of their monthly bills. However, even when confronted with seemingly insolvable financial difficulties, the prospect of declaring bankruptcy is an unsavory notion for lots of hardworking individuals to contemplate.
Quite often, people with debt problems are reluctant to file for bankruptcy because they do not wish to jeopardize their credit scores. Playing off these fears, the last few years have seen a spike in advertisements for businesses pedaling alternatives to bankruptcy like debt settlement and credit counseling. Many consumers have questions about these options.
Most debt relief firms claim that they can significantly reduce a person’s financial obligations by negotiating with creditors to achieve a lump sum settlement. In a similar fashion, credit counseling agencies offer to negotiate with creditors to establish a lower payment or interest rates. But whereas debt relief firms typically work towards achieving a single, lump sum payment, credit counseling agencies usually work towards achieving low monthly payment plans for their clients. If a debtor’s wishes to pursue credit counseling, they should make sure they contact a licensed, not for profit company.
What debt settlement (a/k/a debt consolidation) and credit counseling companies often leave out of their advertising campaigns is that they are unable to provide legal protection to their clients. In addition the following represents significant issues with debt settlement:
- Many creditors do not accept debt settlement terms;
- Creditors may still pursue debt collection against you;
- Creditors may still file legal actions against you;
- Creditors may harass you for payment;
- Agencies may fail to pay your creditors with the money that you have deposited with them;
- Your credit score may continue to plummet while your interest rates continue to go up;
- A 1099 tax form may be issued resulting in tax obligations on the amount of reduced debt;
- The remedies on offer may fail resulting in your being placed in a worse position than before you signed up with a debt settlement or credit counseling agency;
- Debt settlement companies are not regulated and are a leading sources of consumer complaints;
- Debt settlement companies charge sizeable fees and sometimes illegally, charge fees up front;
The Benefits of Filing for Bankruptcy
Finding a New York bankruptcy lawyer and filing for bankruptcy is a legal remedy to help individuals facing financial difficult. During the bankruptcy process, creditors may only communicate with you through your NYC bankruptcy lawyer . Harassing phone calls and any incipient legal actions aimed at collecting money from you are required to cease immediately.
Upon successful completion of the bankruptcy process, eligible debts are either discharged (under Chapter 7) or reorganized into a repayment plan (under Chapter 13) so you are capable of resolving debt problems without future debt worries.
The New York bankruptcy lawyers at the Law Offices of David I. Pankin, P.C. work tirelessly to help our clients make as informed a decision as possible regarding their financial future. If you are interested in learning more about the differences between bankruptcy and debt consolidation or how you can obtain a fresh financial start, contact our office by phone at 888-529-9600 to arrange for a free, initial consultation with one of our NYC bankruptcy lawyers.
Remember,“bankruptcy is not the end, it’s a new beginning.”
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