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Bankruptcy: The potential downsides of settling debts

Constantly dealing with high amounts of debt can be a substantial burden. Individuals in California who experience the challenges of debt may suffer in a variety of ways, and without experience in such matters, they may be uncertain how best to approach the situation. While there are numerous outlets to assist with monetary hardships, those who are considering debt settlement might find it advisable to proceed with caution, as bankruptcy could prove to be a healthier financial solution.

When financial concerns persist for extended periods, a person may seek to negotiate a reduction in monthly payments through a debt settlement company. However, this process is rarely instant, and a person may be asked to cease payments while negotiations are underway. Unfortunately, this does little to stop interest and late fees from causing balances to increase.

In addition, debt settlement might not stop creditors from continuing to report past due accounts to credit bureaus. Throughout this process, a person may still continue to receive constant phone calls and letters from collection agencies. Once finalized, the process may still have a detrimental impact on one's credit score, and there could also be certain tax consequences on settled debts.

Fully understanding the ins and outs of each option for relief can help a person in California make informed decisions regarding his or her financial future. Since this information might not be common knowledge, one could find it beneficial to speak with a bankruptcy attorney for guidance in choosing a path. An attorney can address a client's concerns and assist him or her in forming a plan to pursue relief and provide advice on how to work toward a brighter financial future.

Source: thebalance.com, "The Dangers of Debt Settlement", Latoya Irby, Accessed on May 14, 2018

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