Debt Settlement

Often people find themselves in financial difficulties.  This can be quite challenging, and some will panic.  But many of these cases do not require a filing of bankruptcy to solve the problems.

Rather, an arrangement can often be made with creditors to pay off debt at a lower cost than is actually owed. Such an arrangement is called a “debt settlement.”  Even the tax man has a “debt settlement” procedure, called “offer in compromise”.

Most often, these agreements include the waiving of interest, late fees, and penalties.  In order to make the settlement attractive, many creditors will also take less on the principal balance.

But why will creditors take less?  Creditors do not want to get paid nothing, as is the result in a chapter 7 bankruptcy.  The old saying goes: “half a loaf is better than none”.

A new approach to debt involves looking honestly at the mistakes of the past, without dwelling on them.  What can be done, right now, to bring finances back into balance?  The plan must, in a maximum of five years, bring your financial life to stability.  Let’s talk about the most common practice of shrewd lawyers in debt negotiations:  buying and selling debt at a discount.

Does that sound odd to talk about “buying and selling debt”?  Think about it: people owed money want their money right now.  If they can’t get it, they will sell the “right to collect” to a buyer, for less than is owed.  This process is referred to as “selling at a discount”.  Some “debt paper” is sold for as little as 2 to 4 cents on the dollar!  Of course, this does not affect the amount owed: it stays the same, even though the debt buyer paid only pennies on the dollar.  Now comes the twist in logic:  if you consider yourself a “buyer of the debt” from the lender when you pay it off, you are entitled to the same discount as other buyers of the debt.

Thus unsecured creditors, such as credit card lenders, far prefer debt settlement to bankruptcy. As mentioned earlier, even the Internal Revenue Service will often negotiate settlement of tax debt.  Clearly, this does not guarantee that all creditors will negotiate.  Nevertheless, you should choose your legal counsel wisely, as the right legal assistance is essential for prudent and practical consideration of debt settlements versus bankruptcy vs other workouts.

If you have outstanding debt that you can no longer manage, the lawyers at Mike Norris and Associates can determine which creditors of yours would be willing to negotiate, and then handle those negotiations for you. We have helped many people over the years, and we know how to handle the “sticky situations”.

While we handle your creditors, they won’t be harassing you. And you may just get a good night’s sleep or two.  So call today for a consultation, and evaluate if debt settlement is right for you or if other options should be considered.

Note: We are a debt relief agency.  We help people file for bankruptcy relief under the Bankruptcy Code.