I posted an article on debt settlement vs. bankruptcy several months ago but I think it bears repeating.  If you are struggling with debt and are considering your options to eliminate that debt, understand the true costs and pitfalls of debt settlement.  The New York Times, MSN Money, Fox Business, CNBC, and many others have all tried to warn potential debt settlement clients to the dangers. MSN money notes the following issues:

Debt Settlement Warnings

  • COST Can you afford an extra $3,150 a month for debt settlement?? Debt settlement doesn’t come cheap. Some companies charge 14% to 18% of the total face value of the debt you want settled, while others require a large percentage of the amount they actually settle for you. A client paid Debt Settlement USA 14% of the $270,000 he originally owed, a total of $37,800, in monthly payments spread out over a year.  Bankruptcy should never cost you an excess of $37,000. De Novo Law Firm can start your bankruptcy for as little as $99 down.
  • TIME The average debt settlement process takes closer to two years, said Jack Craven, the president of Debt Settlement USA. The bankruptcy  process with De Novo Law Firm typically takes 3 to 4 months, not years to complete. By the time a debt settlement agency is finished with your case, you could have already improved your credit score by over 150 points if a bankruptcy had been completed.
  • LAWSUITS AND WAGE GARNISHMENTS Some creditors are so resistant to working with debt settlement companies that they immediately file a lawsuit against a debtor as soon as they are contacted by his or her debt-settlement company, said Jamie Welsh, a director with Kaulkin Ginsberg, which tracks the collections industry. Creditors increasingly are using debt collection law firms that are quick to file lawsuits when borrowers default. A successful lawsuit can lead to wage garnishment or liens on your property.  Bankruptcy immediately stops any lawsuits, wage garnishments, and harassing creditor contact once it has been filed.
  • TAXES The difference between what you owe and what you pay in a settlement typically is considered taxable income by the IRS. So if you’re in the 25% federal tax bracket, you could owe $2,500 for every $10,000 in debt that’s forgiven. Bankruptcy doesn’t require taxes on what you pay to your debtors. In many cases, the debt can be completely eliminated from credit accounts!
  • CREDIT SCORE DAMAGE If you do not pay your bills on time and continue to let them be late, your credit score will suffer severely and quickly.  Settling a debt for less than what you owe can do additional damage. Bankruptcy can get you on to improving your credit score by 100 points in just a year!
  • FRAUD There is no agency that monitors debt settlement step by step. Some companies offering debt settlement are scams, eager to take big upfront fees and then disappear. Others are too inept or inexperienced to negotiate effective deals. Either way, the result is the same: money down the drain at a time when you can’t afford the loss. Bankruptcy is not only regulated by holding your attorney accountable, it is also a proven method of effective debt relief. If government agencies, successful business people, and countless others have used it and been successful with it, you can too!
  • LACK OF REGULATION The federal government doesn’t regulate debt-settlement companies, although the Federal Trade Commission is considering imposing some rules. Few states regulate the industry, and “where those states are, the debt-settlement companies aren’t,” Welsh said. So — for now at least — it’s completely “buyer beware.” Bankruptcy is regulated. Your attorney is held accountable for his or her actions. It is a safe way to eliminate debt.

Give yourself the advantage to overcome debt with Bankruptcy!

Call us for a free consultation! (951) 801-5570


Once you have come to see that debt settlement will not work, the choice begins to find a bankruptcy attorney. We, at De Novo Law Firm, pride ourselves on the difference between ourselves and other law firms. We offer:

  • A comprehensive debt solution, not just bankruptcy.

We can offer loan modification, protection from creditor harassment, class action lawsuits for predatory lending, and even commercial loan workouts.  As opposed to cut rate attorneys, we  specialize each case to meet your individual needs!

  • An attorney will represent you on your case start to finish
  • A low down payment of as little as $99 down

Know where the path you are taking will lead you. Call De Novo for a FREE consultation today (951) 801-5570.


Comments are closed.