As a West Palm Beach bankruptcy attorney, I am often faced with the issue as to whether bankruptcy is the best option for an individual or family versus some other method of debt relief including debt consolidation or debt settlement.  Debt consolidation and debt settlement have taken on negative conotations recently because of the many non-lawyer run companies capitalizing on the poor economy.  That being said, debt settlement may be a viable option because many creditors are offering settlements at rates not previously seen because of the fact that many people are unemployed and facing serious financial problems that may push them into bankruptcy. 

There are a few serious issues that possible clients must understand inherent in the debt settlement processs such as possible tax consequences incurred as the result of forgiveness of debt.  Another issue is the fact that the individual must have access to lump sums of funds available to offer the creditor should a settlement be offered.  Bankruptcy, on the other hand, typically does not require significant sums of money and there are typically no tax consequences for consumer debtors.  This could be a key factor is deciding to file bankruptcy.

Creditors are not legally required to offer settlements but in many cases they will and the settlement offers our office has seen range between 10% and 80%.  Typically, if a possible client has a consultation with a bankruptcy attorney and qualifies to file Chapter 7 bankruptcy this is often the most advisable debt relief option because of the fresh start it offers and because Chapter 7 bankruptcy does not require a repayment plan of any sort in most cases.  It is advisable to consult a West Palm Beach Bankruptcy attorney or a debt settlement attorney before taking action.

There are a number of potential clients that will not qualify for Chapter 7 bankruptcy because of the Means Test passed in 2005 that requires the household income of a debtor to be below the median household income for the state of Florida and is based on household size.  The IRS publishes a list of median income figures for each state and will have to be consulted in a consultation with a West Palm Beach bankruptcy attorney.

Assuming that the debtors income exceeds the amount allowed under the Chapter 7 Bankruptct Means Test  (or the debtor is in default under the terms of their mortgage and has the funds to repay the arrears over the term of the repayment plan or has property that must be retained that exceeds the permitted exemption amounts etc), the debtor may only qualify for a Chapter 13 bankruptcy.  If this is the case, one must consider whether debt settlement is preferred and desirable prior to filing the Chapter 13 bankruptcy.  Only a West palm beach Bankruptcy attorney or debt settlement attorney can advise the debtor as to the proper course of action. 

As stated above, the debtor must have the ability to obtain lump sums of funds to settle accounts but if this is possible the amounts they may have to pay creditors through debt settlement could be substantially less than in Chapter 13 Bankruptcy.  Often this is the case where the debtor's income exceeds $100,000 and monthly bankruptcy payments exceed $1000 per month for five years.  Chapter 13 bankruptcy cases can last up to 5 years so plan payments can be high in the aggregate.  If the debtor has the funds it may cost less to settle the debts.  It must be said, however, that creditors can and do refuse to settle in some cases and the debt settlement process is time consuming and stressful.  Debt consolidation (as opposed to debt settlement) is often a waste of resources and should be entered into with extreme caution.  Many attorneys will not entertain nor are they equipped to attempt debt consolidation leaving non-lawyer companies in control of this industry and has a serious risk of abuse.  Our office considers debt settlement as a bankruptcy alternative.  Meaning, that debt settlement may be a way to avoid bankruptcy if successful but there are so many variables that are uncertain that a sucessful result cannot be predicted before embarking on the task.  The key point to emphasize is that debt settlement, unlike bankruptcy, is not an established practice area and one must be aware that should it fail a bankruptcy may have to be filed.

Often debt settlement helps those that cannot file bankruptcy for a number of reasons and is typically less severe on one's credit report.  A settlement is often easier to recover from in terms of impact to credit score.  Many attormeys will not handle debt settlement cases because of the time and uncertainty involved so finding a reputable attorney may take some time.  Consult a West Palm bankruptcy attorney or debt settlement attormey to discuss your rights and educate yourself on Chapter 7 bankruptcy, Chapter 13 Bankruptcy, and debt settlemnt options.  A bankruptcy attorney will be able to advise you on the qualifications required for these options. 

Call Tiller Law today to speak to a West Palm beach bankruptcy attorney or West palm beach debt settlement attorney to go over your options.  Tiller Law has satellite offices in Staurt Florida as well as West Palm Beach, Fort Lauderdale and Miami.  Our main office is located in Palm beach Gardens.