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Florida Bankruptcy Lawyer
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Debt settlement versus bankruptcy

Many Florida consumers are seeking debt relief. For a variety of reasons, families and individuals may find that their debt load is simply unmanageable and then decide to consult with a professional about their options. In some cases, they may consider working with a professional debt settlement company.

In debt settlement, clients are typically advised to stop making the minimum payments on their debts, and instead reserve these funds for eventual settlement. The debt settlement company negotiates with the creditor to reduce the total amount of the debt in exchange for a lump sum payment.

While this may seem an attractive option, it has significant drawbacks. For one thing, the process can take several years to complete and leaves the debtor vulnerable to collection activity, including lawsuits. The debt settlement process can also result in a significantly lowered credit score as well as taxes due on any forgiven debt amount.

Another consideration for debtors is that that settlement company representatives do not have a legal obligation to provide debtors with information about all their options, including Chapter 7 and Chapter 13 bankruptcy, and credit counseling. Nor is the representative required to make recommendations based on what is in the debtor’s best interest.

Bankruptcy lawyers, on the other hand, are required to provide clients with unbiased advice and can review the client’s situation and make recommendations as to what course of action would benefit the client most. If bankruptcy is in the client’s best interest, the lawyer can proceed with a discussion of the various requirements, including completing a pre-filing credit counseling course.

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