People who have an income but still cannot pay all of their bills have several debt relief options available to them. If you are trying to determine whether debt negotiation or a Chapter 13 bankruptcy is the best option for you, we can help. We can review your individual circumstances and help you make an educated decision, but below are a few tidbits of advice to consider:
- Cost. Obtaining debt relief can be expensive, so you must consider what it will cost you. Typical Chapter 13 filings cost somewhere between $2500 and $4000. While this amount seems expensive, your lawyer’s fees can be included in your Chapter 13 plan, which means you can pay the bulk of this amount over a three to five year period. The cost of settling your debt is often 10% of the total amount of the debt that is being settled, but it usually must be paid in advance. There may also be monthly fees that you must pay.
- Taxes. Debt relief options can have negative tax consequences, so you want to make sure you fully understand and are prepared to handle them. Fortunately, there are no tax consequences to obtaining relief from your debt in a Chapter 13 bankruptcy. In contrast, however, when you settle debt and the creditor “forgives” a certain amount, the forgiven amount will result in tax liability. When the forgiven amount is more than $600 it is considered income to you and you will be sent a 1099c tax form.
- Time. You must understand the time commitment it takes to resolve your financial problems. Chapter 13 cases last three to five years. Although this is a long time, you also obtain a fresh financial start when it is over. Bankruptcy allows you the most comprehensive means for dealing with your debt. Although debt negotiations can occur quickly, they can also take a long time. If you only have on creditor to negotiate with, the process is easier and quicker. However, if you have several accounts with different creditors that need to be negotiated, the process gets more complicated and takes longer.
- Credit score. Both bankruptcy and debt settlement will negatively impact your credit score. Your Chapter 13 filing will remain on your credit report for seven years. Debt that is reported as uncollectible or forgiven can also remain on your report for seven years. It is important to understand, however, that you can immediately begin rebuilding your credit score and, with time and patience, you can get your financial life back on track.
Don’t delay any longer. Call us today to schedule your initial consultation. Our office is located in Melbourne, but we proudly serve individuals and businesses across the State of Florida.