Debt Settlement Vs. Bankruptcy

You may have heard of a way to reduce credit card debt called "debt settlement." Debt settlement is different from credit counseling, which is a legitimate service that consumers in Michigan are required to take before and after they file bankruptcy. Debt settlement is a highly profitable business that may or may not benefit consumers.

At Charles J. Schneider, P.C., our attorneys have been helping individuals and business owners in Michigan discharge debt through bankruptcy since 1977. We provide a free initial consultation to discuss debt negotiation. Our law office is conveniently located in Livonia, Michigan, and we serve clients throughout the Detroit metropolitan area.

What Is Debt Settlement?

Debt settlement firms promise to negotiate with credit card companies on your behalf. What these firms may not tell you is that they won't even begin to negotiate with the credit card company until after they collect their fees. In the meantime, interest and penalties will continue to mount up and you will go further in debt. Credit card companies are not required to negotiate with debt settlement firms — and many refuse to.

Comparing Debt Settlement And Bankruptcy

Chapter 7 bankruptcy offers you the full protection of federal law. Creditors are forced to accept the terms of the bankruptcy court. In most cases, unsecured debt, such as credit card bills, is completely discharged by bankruptcy in as little as six months.

The following chart compares debt settlement to bankruptcy:

Debt Settlement Chapter 7 Bankruptcy
Debt relief A percentage of unsecured debts may be canceled (often a far lower percentage than promised).100 percent of unsecured debts are often discharged.
Tax implications Canceled debt above $600 is taxable as income.Debt discharged through bankruptcy is not taxable.
Debt collection Creditors are not prevented from harassing you and attempting to collect debts.Creditors are barred by federal law from harassing you and attempting to collect debts.
Asset protection Creditors can repossess vehicles and other assets.Automatic stay stops creditors from repossessing assets.
Late fees and penalties Late fees and penalties continue to accrue while you are attempting to repay debt.Late fees and penalties are wiped out, along with the debt.

Before you sign up with any debt settlement service, talk to a bankruptcy attorney about your options.

Debt Settlement Attorney Serving Westland And Metro Detroit

To discuss debt settlement with a certified Livonia bankruptcy lawyer, call 734-237-1523 or fill out the contact form on this website. We offer evening and weekend appointments.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.