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Why debt settlement maybe a better option than bankruptcy for some ?

by Dorota Trzeciecka on July 30th, 2017

While the premise of bankruptcy is to give each debtor a fresh start by wiping out unsecured debts, it may not be an option for some debtors. If you have received, or expect to receive life insurance proceeds, interest in property  or money as a result of a property settlement agreement with  a spouse or a divorce decree, or you’re expecting to, or have received an inheritance,  you’re not a bankruptcy candidate.  That is because life insurance proceeds, property settlement, sometimes also called equitable distribution, and inheritance that a debtor has received prior to filing, or will receive within 180 days of filing,  become property of bankruptcy estate, and are not exempt from the reach of creditors.  11 U.S.C. sec. 541.  If that is your situation, your next best option is debt settlement.  Debt settlement lets you settle your debts for less than you owe.  The only pitfall of debt settlement is that the creditor will send you, what is called, 1099C for the forgiven portion of the debt.  That may or may not open you up for tax liability on that amount.  That is why it is important that, before you go with the debt settlement option, you contact a tax accountant, or have your attorney prepare an insolvency worksheet.

Contact me by phone at 305-439-0464, or by email at dorota@debtor-creditorlaw.com for more information about debt settlement option.

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