Is Debt Settlement Worth It?

If bankruptcy is off the table, then yes, debt settlement is worth it. Some people don’t qualify for Chapter 7 because their income is too large and/or they don’t qualify for Chapter 13 because they have too much debt. Chapters 7 and 13 have some informal filing requirements as well. Other debtors have crippling bankruptcy-phobia. They ignore the facts, cling to myths, and cannot even consider filing bankruptcy.

In the end, public and private creditors just want money. Furthermore, they understand that part of something is better than all of nothing. So, if a Chicago debt reduction lawyer diligently negotiates with public or private creditors, and some leverage is available in these negotiations, an attorney can obtain important concessions, like a lower interest rate. In some cases, a Chicago debt settlement lawyer can even reduce the UPB (unpaid principal balance).

Public Debts

These obligations usually include back taxes, unaffordable student loan payments, and FSOs (family support obligations), such as alimony and child support payments.

As for back taxes, relief is available under the IRS Fresh Start Program. Most people qualify for installment agreements. The taxpayer agrees to pay the entire amount due over time. Penalties and interest continue piling up until the debt is paid in full. Other programs, which are available in a few cases, include inability to pay, offer in compromise, and the innocent spouse defense. A lawyer can evaluate your legal and financial situation and suggest the best course of action.

In light of the current student loan crisis, many lenders are willing to forgive part of the UPB or lower the interest rate. No one wants to be the subject of social media attacks and CNN profiles. Usually, a Chicago debt reduction lawyer must present clear proof of how much the debtor can afford to pay and still live a decent lifestyle.

Past-due FSOs are usually not forgivable under any circumstances. However, a lawyer can usually negotiate a payment plan. In many cases, the attorney general or other  collecting agency agrees to waive late fees and penalties. Furthermore, a debt reduction lawyer can connect debtors with family law attorneys who may be able to reduce payments going forward.

Private Debts

Leverage in private debt negotiations include statute of limitations issues, possible fraud, and the threat of a bankruptcy filing.

Usually, the statute of limitations in debt collection matters is four years. The SOL often blocks “zombie debt” collectors and, in a few cases, other debt-buyers as well. On a related note, many debt buyers cannot furnish written documentation of the debt, as required by the Fair Debt Collection Practices Act.

If a court finds fraud, a judge could invalidate the debt contract, including a home mortgage loan. Since the burden of proof is so low in civil proceedings, many banks would rather make a favorable deal than risk a trial.

Finally, the threat to file bankruptcy might be an empty threat, for the reasons mentioned above. However, the bank doesn’t know that.

Count on a Dedicated Cook County Lawyer

No matter what kind of financial problem you are having, bankruptcy could be a way out. For a confidential consultation with an experienced back taxes lawyer in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters throughout the Prairie State.

Source:

scholarship.law.upenn.edu/faculty_scholarship/300/