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Bankruptcy gives quick and permanent relief from unsecured debt

In Florida and nationwide, debt settlement companies have been the subject of intensive scrutiny by state and federal authorities in the past several years. The peak of the problem may be over now that many abusive companies have fallen under the demands of increased regulatory supervision. The question arises, however, whether the remaining group of debt settlement companies can measure up in results to the substantial benefits that the federal bankruptcy remedy gives to qualified consumers.

The debt settlement company acts mainly as a negotiator on behalf of the consumer debtors who have found it impossible to keep up with their financial obligations. The client puts up a down payment, sometimes a quite hefty one, to get the company to start dealing with the creditors on the client's behalf. Where a debt may be feasibly settled with one lump sum payment, the company may succeed in getting a decent discount for the client.

However, that lump sum payment is usually not puny or greatly removed from the original amount owed when the default occurred. It will likely be a drain on the client's budget, even though the client at first may think that the deal was fantastic. Those accounts not amenable to a single payment will be relegated to periodic payments, often monthly.  This returns consumers to the same position as before: being hounded for payments that they cannot make under a severely constrained budget.

The fact is that obtaining significant reductions in principle and/or elimination of built-up interest is not going to help those individuals and married couples who had an overwhelming debt load to begin with. Experience dictates that the morass of massive debt cannot be so easily avoided, at least not through the debt settlement process. A Florida resident, however, who is qualified to file a Chapter 7 bankruptcy will find that all unsecured debt, i.e., credit cards, medical bills, personal loans, and the like, will be discharged and erased without having to make any payments. That is because federal law contemplates giving a fresh start to those who qualify under the law for this superior debt reduction remedy.

Source:, "Debt settlement a bad alternative to bankruptcy", Liz Weston, Aug. 28, 2017

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