If they collect from you, they are in violation of the “Automatic Stay” of bankruptcy. Perhaps the biggest surprise you will encounter if you are able to successfully negotiate a settlement with a debt collector or creditor is good old Uncle Sam. If you owed 00.00 but are able to settle it for 00,00, you will be taxed on the 00.00 that was forgiven.
In addition, the tax on the 00.00 cannot be discharged or wiped out in bankruptcy.
It may be tempting to look to debt consolidation when faced with bills you are unable to pay rather than filing for bankruptcy.
The unfortunate reality is that many who choose the debt consolidation route are worse off than before they started.
These are not quick fixes, but rather long-term financial strategies to help you get out of debt.
When done correctly, debt consolidation can: Making the decision to consolidate debt is the first step.
On the other hand, once a bankruptcy is filed, all collections must stop.
Your creditors cannot call you, send you bills, or sue you.
Our bankruptcy attorneys in Orange County and Los Angeles know exactly how to best resolve your situation.Here’s how many debt settlement companies work: They will tell you to stop paying your credit card bill each month, and instead send a payment to the debt settlement company.The company should escrow the money (hold it in an account). Then, when the debt is extremely overdue, the debt settlement company offers the credit card company a lump sum (in a smaller amount that is owed) to write off the debt.Consolidate Your Debt Now Debt consolidation is combining several unsecured debts — credit cards, medical bills, personal loans, payday loans, etc. Instead of having to write checks to 5–10 creditors every month, you consolidate credit bills into one payment, and write one check.This helps eliminate mistakes that result in finances charges like late payments.