The benefits of filing bankruptcy vs debt settlement in Arizona
by Bankruptcy Attorney Mesa AZ
One of the benefits of debt settlement is the ability to satisfy your debt in full at a lower cost than what you owe. Some creditors may agree to settle your entire debt for single payment or in a payment plan at 50 to 75 cents on the dollar. Paying less than the balance owed is good for individuals with large sums of cash, however it offers no relief to others who lack the necessary cash or savings.
Bankruptcy chapters 7 and 13 can provide relief from a sudden financial problem caused by unemployment, underemployment, a reduction in income, or even a medical emergency. Individuals and families whose monthly expenses have grown beyond their income should consider filing for Chapter 7 bankruptcy in Arizona. This is a way to reduce overall liabilities by discharging all unsecured debt (i.e. credit cards, medical debt, personal loans) and allows individuals to pay only the essential obligations, such as a mortgage or auto loan.
Perhaps another benefit of debt settlement is that all fees associated with this service are paid out as a percentage on the money saved in settlement. Even though it appears as if settlement fees come off the amount saved, in reality these fees may be avoided all together when communicating directly with the creditors. Conversely, filing for bankruptcy in Arizona and the rest of the country, requires sufficient expertise in the field of bankruptcy in order to file the various forms required by bankruptcy court. Furthermore, most Mesa bankruptcy attorneys charge a one-time fee that is not affected by the amount of the debt discharged. As a result, filing for bankruptcy is easier to plan for.
One of the most important differences between debt settlement and bankruptcy is that unlike debt settlement, bankruptcy has no tax consequences. In a debt settlement, the amount that is forgiven is realized as taxable income, and you will issued a 1099 for it.
It’s always recommended to seek the advice of Arizona Bankruptcy Lawyer, before moving forward.