I know what you’ve been told because I have heard it all too. The government wants you to do your very best to avoid bankruptcy at all cost. Bankruptcy is bad; or at least, a harsh remedy to dealing with debt, and should be your last resort. We have all bought into this ‘agreement reality’ and it couldn’t be further from the truth.
I assert, bankruptcy is a powerful tool that should be considered in your overall financial plan that includes eliminating debts. Adrian Lapas, over at Bankruptcy Law Network explained the pitfalls of debt settlement by warning of 1099 tax bills for canceled debts; and even creditor’s unwillingness to negotiate a settlement at all. Oh, and I’m really tired of discussing your credit score because it’s already been adversely affected by your not making your payments on time. In fact, filing bankruptcy might actually improve your credit score once all that bad debt is cleared from your credit report.
I’ve had clients come to me after signing up with these debt settlement companies and spending nearly $10,000 on fees, only to find themselves in lawsuits with their creditors that these companies warned them about and would not help them with. Remember that if you negotiate your settled debts, you’re still paying money toward them and you’d better have some cash saved up to pay it in full if they accept your offer. Also, you must be prepared for that 1099 tax bill at the end of the year because you’ll wind up paying taxes on that can celled debt.
Bankruptcy not only eliminates the debt without any payments from you, it will eliminate your liability entirely and you won’t owe taxes on the debts that were discharged in the bankruptcy. That’s where bankruptcy as a tool, is more efficient and not only a powerful tool, but a cost saving device for you as well.