Mounting debt can feel like an unrelenting storm. In the U.S., bankruptcy filing rose to a staggering 16.8% by the end of 2023, highlighting how common severe financial distress has become.

If you’re facing unmanageable debt, understanding your options is key. Two popular solutions are debt settlement and bankruptcy. Let’s break down debt settlement vs bankruptcy options to help you decide which is right for you.

Debt Settlement: A Negotiated Solution

Debt settlement involves negotiating with creditors to reduce the total amount you owe. This process is typically handled by a debt settlement lawyer, who will work to get creditors to accept a lump-sum payment that’s less than the original debt.

Pros of Debt Settlement

  • Reduced Debt Amount: You pay less than you owe, which can provide relief without declaring bankruptcy.
  • Avoiding Bankruptcy: This option keeps bankruptcy off your credit report.
  • Flexible Process: It’s often more customizable by debt settlement lawyersto your specific financial situation.

Cons of Debt Settlement

  • Impact on Credit: While not as severe as bankruptcy, your credit score will still take a hit.
  • Fees: Debt settlement companies and lawyers often charge significant fees.
  • Taxable Income: The forgiven portion of your debt may be considered taxable income.
  • Not Guaranteed: Creditors are not obligated to agree to settle.

Best for These Situations

Debt settlement may be a good choice if you can gather a lump-sum payment and your creditors are open to negotiation. This works best when you’re behind on payments but not completely drowning in debt.

Bankruptcy: A Legal Reset

Bankruptcy is a legal process to eliminate or restructure your debts. Bankruptcy lawyers can guide you through two common types: Chapter 7 and Chapter 13. Chapter 7 involves liquidating assets to pay debts, while Chapter 13 allows you to create a repayment plan.

Pros of Bankruptcy

  • Complete Debt Relief: Chapter 7 can discharge most unsecured debts, like credit cards and medical bills.
  • Automatic Stay: Creditors must stop collection efforts immediately after you file.
  • Structured Repayment: Chapter 13 gives you a clear repayment timeline.

Cons of Bankruptcy

  • Severe Credit Impact: A bankruptcy filing stays on your credit report for 7-10 years.
  • Asset Loss: In Chapter 7, non-exempt assets may be sold to repay creditors.
  • Public Record: Bankruptcy filings are a matter of public record.

Calculating payments helps decide your debt solution.

Your Fresh Start Awaits

If mounting debt has you feeling trapped, it’s time to take control with the help of an experienced attorney. We won’t leave you confused between debt settlement, vs. bankruptcy. At the Law Office of Joel Gonzalez, you’ll find a dedicated ally who understands the challenges of financial hardship and offers practical solutions to help you move forward.

Seek relief through negotiation or considering legal options to reset your finances; Joel Gonzalez stands to guide you. As a trusted bankruptcy and debt settlement lawyer in Ingleside, Robstown, or Portland, hewill work tirelessly to negotiate the best outcomes for your situation.

Contact the Law Office of Joel Gonzalez today for a consultation and start building the financial freedom you deserve.