Seattle Debt Settlement

Debt settlement is an alternative to bankruptcy.  For some people, bankruptcy is not the right decision but they still need debt relief.  This is where a debt settlement attorney can step in and help.  As a bankruptcy attorney, I can help you understand the pros and cons of debt settlement versus bankruptcy.  I can negotiate settlements with your creditors that allow you to avoid bankruptcy.

My approach to debt negotiation is very straightforward.  A creditor has a choice: either settle for a reasonable amount or force you into bankruptcy.  Accepting your offer provides them with partial payment, without the time, expense, and risk of bankruptcy.  If they force you into bankruptcy, they will have higher collection costs, it will take longer to get paid, and they will probably get much less for their claim.  In many cases, they will get nothing.  I have the credibility to negotiate this way, because I am a bankruptcy lawyer with a proven track record of discharging debt.

Facts About Debt Settlement

  • If you have tried debt settlement on your own and not had any luck, an attorney may be able to get better results.  Sometimes just the fact that the debt collector is talking to an attorney is enough to convince them that you are serious.  Additionally, I am a trained litigator and negotiator.  I know what to say and what not to say.
  • Be careful about who you hire.  Debt consolidation companies that advertise on radio, TV, and the internet have a bad reputation.  I am not a telemarketer trying to pressure people into signing up with shady debt consolidation service.  I am a local lawyer.  We will meet face to face.
  • Debt settlement allows you to resolve your debts for between 20% and 75% of what you owe.  It is up to the creditors to accept your offer.  Some creditors require you to be in default before they will negotiate.
  • Debt settlement is a good option if only a few of your debts are a problem.  For example if you can pay all of your bills except for a handful of large medical bills, then debt settlement would allow you to resolve those medical bills without resorting to bankruptcy.
  • You have non-exempt assets that a chapter 7 trustee would take and liquidate.  By selling those assets yourself and settling with your creditors, you avoid the time and expense of a bankruptcy.
  • Your creditors are not required to accept a debt settlement offer.  Your creditors have the right to demand payment in full.  If your creditors will not cooperate, then bankruptcy may be your only option.
  • Your creditors will expect payment relatively quickly.  Most creditors will want to be paid in anywhere from 1-6 months, with most creditors requiring payment in no more than 2-3 months.
  • Never settle a debt without getting a written agreement from a creditor first.  If a creditor will not give you a written settlement agreement, then you should be very cautious.
  • Settling a debt may create taxable income.  This is called forgiveness of indebtedness income and is reported on a Form 1099-C.  If you owe $1,000, and you settle for $250, then $750 of the debt is forgiven.  The IRS will treat that $750 like cash income.  If the amounts are large enough, this can result in you losing your tax refund or even having to pay tax at the end of the year.
    Depending on your financial circumstances, you will not have to pay tax on debts that are forgiven.  Another way to avoid a tax problem is to file bankruptcy, instead of doing a debt settlement; because, bankruptcy does not create taxable income.  I also offer tax resolution services and can help you file an application to avoid paying tax on income from forgiven debts.  This is called the insolvency exclusion and is reported on IRS Form 982.

Debt settlement, also called debt consolidation, is not for everyone.  However if it is right for you, it is a good way to resolve your debts without filing bankruptcy.  If you have debts that you cannot manage, you should consider debt settlement as one option for getting a financial fresh start.  I can help you analyze and understand your financial situation; so that, you can decide whether to enter into debt settlement negotiations or file bankruptcy.

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