Debt Relief, Consolidation & Negotiation

Debt relief and negotiation is possible with Kercher Law
One of the more popular debt relief schemes on TV and advertisements is the offer to either negotiate or consolidate your debt. The television ads are very appealing with the claim that by taking these actions you can “avoid bankruptcy”.  However, a bankruptcy filing may turn out to be your best option and you should not act on the impulse to avoid bankruptcy at all costs without first considering the option. I have had many clients who have drained all of their savings, IRAs, 401(k)s and other assets just to keep paying credit cards when those assets would generally be FULLY protected (IRAs and 401(k)s are protected to OVER $1 million) even though a bankruptcy is filed.

While there are some reputable debt settlement firms, sometimes the end result is worse . Here’s an example of a major ad on television: “I paid only $33,000 on $64,000 in debt.” While on the surface this seems like a good idea and a good result, what they don’t tell you (except in very small print at the bottom of the ad, in a five-second flash), is that they will charge you a fee of up to 20 percent of the debt “settled,” and worse, that you will incur tax debt as a result of the debt settlements. So, in their example, you initially pay out $33,000 to settle, plus 20 percent of $64,000. Then the creditors send you 1099 forms for “debt forgiveness” which is income to you in that tax year for the other $31,000 in forgiven debt, which, depending on your tax bracket, could result in another $5-6,000 in tax liability. Bankruptcy provides total debt relief in the form of a bankruptcy “discharge” and has NO negative tax consequences.

Another problem that my clients have encountered is that, while many companies do participate in these debt relief and settlement programs, some creditors simply do not. So, even if ONE credit card company does not “play ball” and participate in the settlement proposal, you will get sued by that creditor… then the settlement company will tell you to handle that one yourself, or the company will give you bad advice to ignore it, and you wind up with a judgment against you and then possible asset loss, such as a bank account levy. A bankruptcy filing, if appropriate, does not have this negative aspect. All of your creditors must participate in the bankruptcy, in one court. They have no choice in the matter… their rights are now controlled by the federal law known as the United States Bankruptcy Code.