When consumers seek to settle their debt, they are essentially having a third party negotiate a lower lump sum payment to resolve the amount owed. This option is usually attractive to debtors because they are promised that they can resolve their debts by only paying a fraction of the balances.
The truth is that debt settlement is contingent on creditors accepting the amounts that are proposed by the third party overseeing the management of payments by a consumer. Additionally, this method of negotiating a settlement is something a debtor can handle by him or herself without having to pay another party for.
Cincinnati Lawyer Reviews Debt Settlement Plans
Have you accumulated an amount of debt that is simply unmanageable? Are you having difficulty seeing any way to ever finish paying off credit card bills, medical expenses, or mortgage payments? Before you enter into any agreement to have another party settle your debt, it is in your best interest to take advantage of a legal consultation.
Steiden Law Offices has offices in Cincinnati and Covington in Ohio as well as Covington and Florence in Northern Kentucky. Whether your case will be filed in the U.S. Bankruptcy Court Southern District of Ohio Cincinnati Divisional Office or the United States Bankruptcy Court in the Eastern District of Kentucky, Covington Division, call us for more information.
You can have our experienced bankruptcy attorneys review your case and determine the best solution for your particular situation by calling right now to set up a free, no obligation consultation
Northern Kentucky Debt Settlement Information Center
- How do these types of companies settle debts?
- What are the advantages and disadvantages of debt settlement?
- Why is bankruptcy a better option than settling debts through a third party?
- Where can I find more information about this form of debt reduction?
With this type of debt resolution, a company will typically claim that it can negotiate your total debt to a much lower amount. This will often be advertised or sold as being cents on the dollar. Dozens of companies in Cincinnati, OH, advertise debt settlement services as an alternative to filing for bankruptcy.
A consumer will contact a company that handles debt settlement cases in Ohio and Kentucky. The consumer will then be asked to sign a contract or agreement. Instead of paying creditors, these debtors then pay the company, which puts the money into an escrow account.
The money that is put into the account does not immediately go to the creditors. Rather, the company will negotiate with the creditors for a reduced settlement amount—but only when there is enough money in the escrow account to pay a lump sum amount.
If creditors agree to the proposed settlement amounts, then it is possible that debtors can indeed resolve their debt issues by paying significantly less than they would if making regular payments. In some cases, resolutions are reached much more quickly than consumers would have achieved on their own.
Debt settlement is not without some very noteworthy disadvantages, though. By forgoing payments directly to creditors, consumers will often have their credit records significantly harmed.
The biggest drawback to having a third party attempt to settle debts is there is no guarantee that a creditor will accept a proposed settlement. This aspect represents a very real danger for debtors because they could find themselves in an even worse situation if the settlement companies are unsuccessful and deplete the amount charge fees that deplete the original amount put into the escrow account.
Many people are reluctant to file bankruptcy for fear of significant damage to their credit records or having their bankruptcies be matters of public record. Such concerns are understandable, but the possible long-term damage must be considered when a person is considering using a debt settlement company specifically to avoid filing bankruptcy.
In many cases, bankruptcy is clearly the better option. Chapter 7 or Chapter 13 bankruptcy can provide these advantages:
- All Creditors Dealt With at Same Time — Rather than having to anxiously wait while a company negotiates individually with each creditor, a consumer who files personal bankruptcy will either clear all of their unsecured debts or submit a proposed payment plan that must be accepted by all creditors at a 341 meeting.
- No Creditor Harassment — Creditors will be prohibited from all future collection efforts or lawsuits as soon as a debtor files his or her Chapter 7 or Chapter 13 petition. A consumer will also be protected from having his or her wages garnished.
- No Tax Consequences — Debt forgiveness in bankruptcy is not taxable income. If the amount that a debtor pays a creditor to settle a debt exceeds $600, then the IRS will view this as taxable income.
Settling Credit Card Debt | Consumer Information — This Federal Trade Commission (FTC) article provides some very valuable recommendations all people considering a settlement program should keep in mind. It discusses some of the risks of debt settlement, signs of scams, and things to keep in mind when doing research. The FTC also lists other debt relief options, including bankruptcy.
A Roll of the Dice: Debt Settlement Still a Risky Strategy for Debt-Burdened Households — Find research conducted by this nonprofit and non-partisan company called the Center for Responsible Lending (CRL). The study provides an overview of the debt settlement business model as well as several tables of information about average numbers of debts, totals of debts, and resolutions. The CRL found that a substantial share of debt settlement clients are unlikely to settle the two-thirds of their enrolled debts that is necessary to have a positive change in financial position after 36 months.
Find a Bankruptcy Lawyer Who Will Determine the Best Debt Settlement Plan for You
If you are overwhelmed by debt and struggling to pay your bills every month, you need to proceed with caution when considering your debt relief options if you live in Cincinnati, Ohio, or the surrounding areas of Norwood, Elmwood Place, and Saint Bernard.
With offices in Cincinnati and Mainesville in Ohio and Covington and Florence in Northern Kentucky, our bankruptcy attorneys can help you determine the best way to proceed in your particular case.
Numerous companies prey upon everyday people in desperate situations, and you should be sure that any party offering to settle your debt is going to do it in the most effective way possible.
Bankruptcy is a frightening term for many, but it also offers immeasurable benefits for countless people in difficult situations. Steiden Law Offices helps clients in Hamilton County, Boone County, and Kenton County file Chapter 7 or Chapter 13 bankruptcy.
Our Cincinnati bankruptcy attorneys have been serving communities throughout Ohio and Northern Kentucky for more than two decades. Call right now to schedule a free, confidential consultation and take your first step toward financial freedom.