Chapter 13 bankruptcy (3-5 year repayment plan) can be viewed as being similar to debt settlement programs offered by private companies. However, there are several key benefits to filing a Chapter 13 bankruptcy over entering into a debt settlement program:
- Chapter 13 bankruptcy includes all creditors, while creditors can decide not to participate in a settlement;
- Chapter 13 bankruptcy stops all creditor collection action (e.g. lawsuits, garnishment, collection calls and letters), while debt settlement programs often are unable to stop all creditor action;
- Chapter 13 plans often can result in more forgiven debt than settlements can provide (though not in every instance – each case must be reviewed carefully to determine how much debt can be discharged)
- Debt settlements usually result in taxable forgiveness of debt income, while no tax is paid on debt discharged in bankruptcy.
Every case is unique. When we discuss your situation, all options are considered. Contact me for a free consultation.