Bankruptcy versus Debt Settlement
Most people believe that debt settlement and Chapter 13 bankruptcy are the same thing. However, people that have taken a closer look and have read the details know that they are two totally different things. These two are the best solutions for those that have incurred an extreme amount of debt and have no other option than to either seek debt settlement or Chapter 13 bankruptcy.
Chapter 13 bankruptcy requires an individual to repay all debts on a repayment system created by the government and is enforced by federal law. Debt settlement means that you have contacted each of your debtors and have reached an agreement to repay your debt to them according to a predetermined agreement. Keep in mind that if you would choose this option that you or your debtor can cancel the predetermined payment arrangement at any time. Even though debt settlement sounds like an easy process it isn’t and neither is bankruptcy. With debt settlement your debtors have the right to turn down your offer to create a debt repayment plan and demand the full amount be paid. There is no law that demands any debtor to agree with a repayment plan. A good example of this is credit card companies. Most of them will refuse to agree to any type of repayment plan. There are different ways that companies treat credit cards and there are also several different cards that offer different options for repaying.
Debtors also have the right to refuse your repayment plan and instead create their own repayment plan, refer your debt to a collection agency or attach your wages for repayment. On the other hand with a Chapter 13 Bankruptcy if a debtor refuses to accept a predetermined repayment plan they could possibly lose the chance to get their money at all. For example, if you have medical bills through a hospital and they choose not to be part of the debt repayment through a 13 Bankruptcy the debt you have with them will be completely eradicated as part of the Chapter 13 Bankruptcy. This is strictly enforced by a federal bankruptcy judge. Also regarding debt settlement there is no set amount that you repay to your debtors. When you contact your debtors to negotiate you are almost forced to beg them to accept a repayment plan. With a 13 Bankruptcy the amount that you repay is determined by the bankruptcy laws passed by Congress. A federal judge determines what you can repay according to your finances and expenses. They determine how much you can repay each of your debtors. Your debtors have no choice but to accept the repayment terms again according to federal law and cannot negotiate for more than that. The remaining balance you owe each of your debtors is eliminated after your 13 Bankruptcy is completed in court. Also see this site about Norwegian refinancing in order to see how you can go about preventing bankruptcy by considering your options.
Furthermore on debt settlement the amount that is forgiven may be subject to taxes when you file your income tax. With bankruptcy there are no limitations or taxes. With a 13 Bankruptcy you don’t encounter any taxable income. With a 13 Bankruptcy debtors must abide by federal laws and accept any payment they receive.