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Debt settlement or Chapter 7 bankruptcy?

The television advertisements are appealing. When one is struggling to pay debts, debt settlement agencies are available to assist in reducing or eliminating debt. While the services offered by these companies are appealing to many Kentucky residents, the benefits of such action versus filing for Chapter 7 bankruptcy should be carefully analyzed.

One service offered by these settlement agencies is the ability to negotiate the amount of the debt owed. Many times, clients are instructed to cease paying bills and instead place the money in a savings account while the company negotiates on their behalf. However, without the protection of the bankruptcy process, creditors can sue for collection and seek to have wages garnished and/or bank accounts seized. Furthermore, once the debt negotiation is finally complete, the balance owed is often reduced, but, the forgiven portion becomes reportable for income tax purposes.

One other concern often addressed in these popular television advertisements is the ability to keep assets rather than risk them in the bankruptcy process. While some assets may be liquidated under Chapter 7 bankruptcy, the average individual's assets are often protected under a myriad of state and federal laws designed to protect the individual. In many instances, the individual is able to keep all of their assets.

In some cases, debt settlement is the appropriate option. Nevertheless, filing for Chapter 7 bankruptcy is often the better solution in relieving the debt burden. Experienced legal counsel can assist the Kentucky resident in reviewing his or her individual situation and determining the appropriate strategy to bring an end to financial problems.

Source:, "Debt settlement a bad alternative to bankruptcy", Liz Weston, Aug. 30, 2017

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Law Office of Ginger C. Cord, PSC
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Lexington, KY 40507

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