If you are struggling with financial issues, you are not alone. In recent years, many individuals, families, and businesses have become overwhelmed by debt, exacerbated in large part by the pandemic. According to recent estimates, 340 million Americans are currently in debt. As you start to explore your debt-relief options, you may hear the terms “debt settlement” and “bankruptcy” and wonder if they are interchangeable. These two terms refer to different actions, so it’s important to understand what each option entails. Let’s take a look at the differences between debt settlement and bankruptcy in New York.
What Does Debt Settlement Mean?
Debt settlement refers to the process of making monthly payments to a company to pay back a portion of the debt you owe. Debt settlement companies often have deals with credit card companies, and they often mislead you as they attempt to recoup the debt you owe. For instance, many consumers don’t know that debt settlement companies pay themselves first and only pay creditors once they have a lump sum to hand over. As a result, creditors become tired of waiting for payment, which may prompt them to sue you for non-payment. Your credit report will suffer, and you’ll continue to be penalized each month for late payments, increased balances, delinquencies, and more.
Bankruptcy Offers a Path Forward
While many people still carry negative associations when they hear the word “bankruptcy,” this option offers consumers a concrete path forward. Unlike paying a debt settlement company that is likely taking advantage of you, filing for bankruptcy puts a stop to harassing phone calls from creditors and debt collectors. Once you file for bankruptcy, the damage to your credit report stops as well, as creditors cannot report delinquencies, late payments, or increased balances. Instead, you can start to slowly rebuild your credit as you move forward into a more stable and sustainable financial future.
How an Experienced New York Bankruptcy Attorney Can Help
Monetary problems can be a deep source of shame for many people. However, it’s essential to understand that you are not alone. Instead of suffering in silence, enlist the support of a compassionate bankruptcy attorney who genuinely wants to help you obtain the fresh financial start you need. Your attorney understands how stressful debt can be, and they will help you understand, explore, and select the most strategic path forward.