Benefits of Bankruptcy

When you compare filing bankruptcy to your other options, you will see for most financial problems bankruptcy is a good solution and one that you should be fully informed about.

If you’re searching for information about dealing with your debts, you have probably seen ads for debt settlement programs. These programs range from simply not working, to being out right scams. Debt settlement programs make promises that they can settle your debts for “pennies on the dollar.” However, people often end up with more debt than when they started. Before you sign up for one of these programs you should contact me for free and complete review of your situation.

When you talk to a debt settlement company you will speak with salesperson that cares about only two things, the amount of debt you have, and the amount that they can get you to pay every month. When you speak with me, before your case is filed, I will ask a number of questions about items that you own, your monthly income and expenses, and specific questions about your finances.

The questions I ask you are the questions you would expect to be asked to participate in a process that could eliminate all of your debt or save you thousands of dollars. The information you provide allows me to give you detailed advice about the relief you’re entitled to under Federal Bankruptcy Law.

Creditors cannot ignore your bankruptcy

While it is true that if you are behind on your bills, creditors may be willing to settle for a smaller amount. Creditors do not legally have to settle for anything less than the full amount you owe them. Many creditors will not work with debt settlement companies and some creditors, such as credit unions, are legally unable to settle debts.

Unfortunately, this means people will spend thousands of dollars to ‘settle’ some portion of their debt and still need to contact me to file a bankruptcy.  This happens after they receive a lawsuit or judgment and find out that not all their debts were settled. Please contact me before signing up with a ‘debt settlement’ program. It is a free consultation that could save you thousands of dollars in unnecessary fees.

Unlike a debt settlement program, creditors do not have the ability to ignore your bankruptcy. Federal bankruptcy law requires that all of the debts you owe on the day you file are included in your bankruptcy. Any creditor who willfully ignores your bankruptcy filing can be sued for violating the law. This means the bankruptcy process allows you to deal with all of your bills in way that no debt settlement program possibly can.

You will not owe Income Taxes on the debts discharged in Bankruptcy

Another problem with settling debts is that the amount of the debt reduction is considered income and you must pay income taxes on it. If you owe $20,000 on a debt and it gets settled for $10,000, the creditor will issue you a 1099-C for $10,000 and you must include this $10,000 when you do your income taxes. This, nasty little surprise, can wipeout a significant amount of what you thought you saved.

A discharge of debts through bankruptcy creates NO tax liability. The IRS considers a bankruptcy discharge a finding of insolvency. Insolvency means you have more debts than assets and, as a result, you will not owe taxes on the debts eliminated by the bankruptcy. I have helped many people who received an unexpected 1099-C from a debt settlement company. By filing a timely bankruptcy, we proved the client’s insolvency to the IRS, and avoided the tax consequences of the debt settlement. If you have received a 1099-c from a creditor, or if you are concerned about owing taxes because of a debt settlement, please contact me and I can help you with this situation.

The fees I charge for your bankruptcy are affordable and clear

The final issue with these debt settlement programs is the extremely high fees that they will charge to settle your debts. The debt settlement companies charge a fee based on the amount that they say they can save you. This fee can be thousands of dollars and is often collected before money is paid to your creditors. Before you sign up with any debt settlement program you should ask for a detailed written fee agreement with the total amount you will be paying and what services you will be provided. This not a conversation the salesperson you are talking to wants to have.

My legal fees for a Chapter 7 bankruptcy start at $800 and my initial legal fees for a Chapter 13 bankruptcy start at $500. When we speak, I will give a clear and simple quote for the fees that I will charge to help you get relief from your debts and I will send you a retainer agreement putting this fee in writing. Unlike the debt settlement companies whose fees are hidden and high, my fees are low and transparent. All of the fees I charge are reviewed by the Bankruptcy Court to ensure the fees are fair and reasonable. While the price of many things has been going up recently, I have worked to keep my fees manageable, and I will guarantee any fee I quote you for at least a year.

Debt Settlement is not same as Consumer Credit Counseling or working with a local attorney

It is important to understand that the concerns with debt settlement agencies do not apply the services offered by Consumer Credit Counseling, such as Consumer Credit Counseling of Buffalo, or Consumer Credit Counseling of Rochester. These counseling services work with you to set up a plan that fully pays your creditors. These plans can often reduce the fees and interest you pay. The fees the counseling agencies charge are transparent and reasonable. I regularly refer people to these agencies, if a bankruptcy is not a good solution for them. I also include both agencies on my list of recommended providers for required bankruptcy counseling.

There are also situations in which people cannot afford to pay their bills, but a bankruptcy filing has an adverse consequence. When I speak with you, we will review a wide variety of information. These questions can reveal that bankruptcy is not an appropriate solution for your problem. In these situations, I will refer your case to a local attorney with the expertise and experience to represent in you in negotiating or litigating directly with your creditors.

Bankruptcy is a better option than going deeper in debt

When people struggle with debt, particularly high interest rate credit card debt, the idea of getting a consolidation loan and having one low payment, with a low interest rate, is very appealing. Unfortunately, people often find that, even though they know they can afford the payment on the new loan, no bank will give them the loan. If you have been unsuccessful in your efforts to consolidate your bills, please contact me so that I can review your situation and help you determine the best way forward.

If you own your home, you may have considered taking out a home equity loan or a new mortgage to try to pay your bills. While it makes sense to use the equity in your home to make repairs or improvements on your house, or to invest in a family member’s education, it does not make sense to use that equity to pay off your credit card bills. Once you use the equity to pay bills, it will not be available, if you need it for home improvements or educational expenses. In most cases a bankruptcy allows you to protect all of the equity in your home while permanently resolving your bills. Taking a loan against the equity in your home may take a debt that you could simply eliminate and turn into a bill you will pay for the next 15 or 30 years.

Please contact me before you make this decision so I can give you the information to help you make the best decision about your finances.