Debt settlement is used for a person who makes too much money or has too many assets to file for bankruptcy. Additionally, bankruptcy may result in the assets being taken away – this is unnecessary when a settlement is possible.
What Are Debt Settlement Resolution Methods?
A debt settlement method would be a simple payment plan for some time or a lump sum payment for a structured settlement. Clients need advice as to how to structure a payment plan and the most effective plan.
What Are The Pros Of A Debt Settlement?
The greatest pro of debt settlement is that it avoids bankruptcy. This is especially the case when the client has too much in assets to use bankruptcy as a debt elimination tool.
What Are The Negatives Of A Debt Settlement?
The greatest negative of a debt settlement is that the client will probably receive a 1099 C cancellation of debt form when the debt is forgiven.
Forgiven or canceled debt is taxable as income by the IRS. So, if you make a settlement for 50 cents on the dollar and you are in the 20% tax bracket, it’s a settlement at about 70% because you’ll have to pay the tax on a forgiven debt.
How Much Could Debt Settlement Save?
The amount you settle for (and therefore save) will depend on what the creditor wants to receive.
For creditors, this depends on the time of the year. Creditors like to settle for less at the end of the year because they want to show good numbers. In other words, they’ll give you more of a discount because it makes their year-end financials look better.
How Is Hiring A Law Firm Better Than Hiring A Debt Settlement Company?
Debt settlement involves the practice of law because it takes a lawyer’s skill and judgment to advise clients about the settlement of debt and how it works.
Debt settlement companies often overpromise and always underdeliver. An attorney who regularly practices bankruptcy law and debt settlement can provide you with the insight you need and advise which is better: bankruptcy or debt settlement.
For more information on Debt Settlement In California State, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (818) 514-1355 today.