Often when people come to the realization that they could be facing financial hardships, they either continue to ignore the warning signs, or they consider fixing it. One of the most common options people turn to is working with a debt consolidation or a debt settlement company.

We’ve all heard the radio ads and commercials for these companies offering a quick fix to your debt problems. This may sound like a good idea, however, filing for Ch.7 or Ch.13 Bankruptcy in Florida is usually always the better choice.

How do debt consolidation companies work?

When working with a debt consolidation company, you usually give them all of your bills and stop making payments on your bills. Then, you make a monthly payment to the company and they will, in turn, keep some of your payments as their fees and save the rest to eventually try and settle your debts.

Once all of the money that you have deposited to the debt consolidation company has increased enough, they will often approach your creditors and offer them far less than the amount you owe. So what’s wrong with this scenario?

Your bills aren’t getting paid as soon as you start working with the debt consolidation company. This means your creditors may take the following actions:

• Send your debts to a collections agency which will affect your credit rating possibly resulting in lawsuits and  judgments

• Decide not to accept less than 100% of your debt

• Garnish your wages and collect all of your debt

During this time of consolidation or settlement activity:

• Your credit score will take some big hits because your bills are not being paid.

• Creditors may still take legal action by filing a lawsuit and pursuing judgments

• You can owe taxes on the debts that are forgiven when the consolidation company settles your debts for less than you owe

Why is filing for bankruptcy a better option?

There are many more benefits of filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. Working with a professional bankruptcy attorney will help you decide which option is best for your situation. 

• First off, bankruptcy provides finality and guaranteed total relief.

• Bankruptcy is also a much faster process

• There are zero taxes payable on the debts discharged in bankruptcy

• Creditors don’t have to agree on a settlement

• Creditors cannot take any action against your property without the Court’s approval and your ability to be heard

• Creditors can only get the assets from you that cannot be exempted, and even then you have the option to redeem them without a creditor interfering

• You are protected from garnishments and judgments once the bankruptcy case is filed

• Your credit score is more likely to improve at a quicker rate

Keep in mind, some debt consolidation and settlement companies often scam consumers. When working with a Florida bankruptcy attorney, you’ll have the peace of mind and assurance that they’re not pulling a scam on you.

Contrary to what you may hear, bankruptcy does not mean that you are going to lose your home, your car, or that you will never be able to borrow money again. Bankruptcy is a powerful tool that lets everyday people even the playing field in an unfair environment in order to achieve financial relief and freedom.

It is important for all consumers to know that both Chapter 7 and Chapter 13 provide them with the relief and full discharge that they are looking for in bankruptcy; however, deciding which type of bankruptcy is best suited for a person takes skill, knowledge, and creativity. These are the types of traits that have helped the attorneys of the Wynn Law Firm serve the citizens of the Florida Panhandle and Beyond for over 40 years.