Debt Settlement Vs. Bankruptcy In Ohio
You may be researching ways to manage your debt and have come across companies that promise to settle what you owe for less than the full balance. While debt settlement may seem like an alternative to bankruptcy, each approach has different costs, risks and potential benefits. As an Ohio bankruptcy attorney at Borders Law, LLC, I want to give you an honest look at debt settlement vs. bankruptcy.
I am Keith L. Borders and for more than 21 years, I have represented individuals facing financial difficulties, guiding debtors through Chapter 7 and Chapter 13 bankruptcy cases and addressing a range of related consumer protection matters. My goal is to help you pick the path that fits your life, not to sell you on either one.
The Hidden Risks Of Debt Settlement
Settlement companies often tell clients to stop paying creditors while savings build up in a separate account. That approach carries real risk. Late fees and interest keep growing, and a creditor can still sue you or garnish your wages while you wait. Here are other risks to weigh before you sign anything:
- Settlement company fees based on enrolled debt
- Credit score damage from missed payments
- Income taxes on forgiven debt
- No guarantee that creditors will settle
Ask any company to explain these points in writing first. A clear answer says a lot about who you are dealing with.
When Debt Settlement Might Make Sense
Settlement can work for some people. It tends to fit when you have only a few debts, a lump sum available and a creditor willing to negotiate.
A debt management plan through a nonprofit credit counseling agency is another route. Creditors may lower your interest rates, and you make one monthly payment, usually over three to five years. These options can suit you if your income is steady and your debt is manageable.
When Bankruptcy Is The Stronger Option
Bankruptcy offers legal protection that a settlement cannot. Once I file your case, the automatic stay generally stops collection calls, lawsuits and wage garnishment. If you qualify, Chapter 7 can eliminate many noncollateralized debts like credit cards and medical bills. Chapter 13 can help you bring vehicle payments or an overdue mortgage up to date through a three- to five-year plan.
Qualified Ohio residents who meet federal bankruptcy residency and domicile requirements can protect certain real and personal property using Ohio’s statutory exemption laws. Bankruptcy may be the better fit if:
- Creditors are suing you or garnishing your wages
- Your debts will take years to repay
- You are behind on your mortgage or car payments
Bankruptcy is not right for everyone, and it affects your credit for years. During a consultation, I will review your income, debts and goals. Then I will tell you honestly which option makes sense, even when that option is not bankruptcy.
Call Borders Law, LLC, To Talk Through Your Options Today
If you are weighing debt settlement vs. bankruptcy, call me at Borders Law, LLC, at 216-435-5668 or contact me online to schedule a consultation. I will explain each option in plain language and answer your questions, with no pressure to choose bankruptcy.
Borders Law, LLC, is a debt relief firm. I help people file for bankruptcy relief under the Bankruptcy Code.