Debt Settlement Company Ripoffs and Lies - Bankruptcy Is Not Always Bad

Prior to filing bankruptcy please consult with a Bankruptcy Attorney to ensure your legal rights.

In the past few years bankruptcy filings have hit historic levels, the recession of 2008 took its toll on many families as companies downsized or shut their doors. Many families debated and tormented themselves prior to filing, trying to save what they worked so hard to build. They felt the stress of trying to make the next house payment or buying enough food to feed their family. They distressed when the garnishment order was delivered or when the foreclosure notice arrived. Their families felt the stress and their health began to suffer. Bankruptcy was the taboo they did not want to face. Why? Why did they put their families and themselves through all this self torture and stress?

The answer is simple; they felt bankruptcy was a death sentence, the end of their financial lives. In reality bankruptcy is not the end but a beginning, a beginning to rebuilding what may have been lost. Used for the right reasons bankruptcy is a life saving event, a chance to live the American dream. There are some people that want you to believe that bankruptcy is a sign of failure, that you’re a bum, irresponsible and worthless. First thing to do is stop listening to these people, they couldn’t be more wrong.

If you are finances are becoming strained and you are having trouble making your bills continue reading this could save your life. I went through all this myself and I finally made the decision to file bankruptcy and I believe that saved my life. Your situation may have been brought on my a job loss, divorce, or a medical emergency during a period where you had no insurance. In other words, things beyond your control. Prior to filing my own bankruptcy, I did what I could, I fought off bankruptcy for 3 years. I felt the stress and tortured myself, I called myself a failure and almost believed it. I also suffered a heart attack, the stress had put such a tremendous strain on me it affected my health.

Prior to filing I looked everywhere for help. I looked at a few companies that said they could help. They all could help me avoid bankruptcy, they would spare me the stigma of bankruptcy. They all said that I needed to avoid bankruptcy to protect my financial future as well as my credit rating. I looked at dozens of credit counseling companies and debt consolidation companies and found out one thing. They all told me things that I wanted to hear, but not the reality of the situation, they did not and could not make things better. In the end, they only helped make the situation worse by charging thousands of dollars in fees and not changing a thing.

The first thing they will tell you is that bankruptcy will ruin your credit rating and they are right it will. But think about this, how good is your credit rating? I mean if you are thinking about bankruptcy that means you are already in a financial crisis. You probably are already delinquent on some or all of your debt. You may already have money judgements against you. Your credit is already whacked, you couldn’t get a loan if your life depended on it. How much will bankruptcy hurt your credit now, in reality, very little.

Working with a debt settlement program they will have you stop paying your creditors. In reality, you probably already stopped paying some of your creditors. What about the ones that you have been paying, the ones that are reporting favorably to the bureau, they will have you stop paying them. They tell you that they will make a deal with the creditor for pennies on the dollar, saving you money. Prior to making a settlement offer, you will need to make payments to them, where they will put the money into an account. When there is enough money in the account, then and only then will they contact the creditor to arrange a settlement. The first couple of payments you make to the debt settlement company will be mostly fees with very little going to your account for the payments.

What the debt settlement company did not tell you is that you can do everything they do and not have to pay a fee.  Creditors will work with you to reach a settlement rather than going to court if they can avoid it.   The settlement in either case will also trigger a taxable event.  The money they “forgive” or wipe away is reported to the IRS and is considered a taxable amount on your taxes. 

During this time the creditor still has a legal right to payment and can sue you and gain a money judgment against you. This is while you are paying the debt settlement company and they will tell you that some creditors will sue while others wont. With a money judgement against you, the creditor can also sue for a wage garnishment, the debt settlement company can not prevent this. Also a money judgment further destroys your credit

As I mentioned earlier, if you are considering bankruptcy, your credit is already been damaged. Therefore declaring bankruptcy will have a negative effect but not nearly as bad as you would think. An example my credit score as of this writing is 558, I recently worked with a client that has a score of 440. She has not declared bankruptcy and has multiple judgments against her. My credit rating is getting better each month, whereas hers is still going down. I am in a far better place at this moment. Incidentally I gave her the number of a bankruptcy attorney to talk too as well.

Some other facts about bankruptcy you may not know. Once you file all collection activity must stop. This means creditor calls will stop. Wage garnishments are stopped as well. Basically all attempts to collect money from you must stop. Foreclosure proceedings must also stop. You may still need to give up the house but now you have some breathing room. You may also be able to save the house.

Another false belief is that if you file you will lose everything. There are exemptions to bankruptcy which allow you to keep personal property, such as your car, clothes, retirement accounts and some cash. In my bankruptcy I was able to exempt all my personal property including 2 cars. How about the tax situation? In a bankruptcy the money that is forgiven is no longer taxable.

The idea of bankruptcy is a fresh new start, a new beginning.  Bankruptcy is not a taboo, it does not make you a bad person.  On the contrary I think it shows responsibility.   When you noticed your situation and realized there was nothing you could do you made a responsible decision for your family. You gave them and yourself a second chance and we all deserve a second chance.  If you are going through something like this, I commend you for your decision and wish you luck and success in the future.  You deserve it.