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Home Q&A Forum Debt settlement agreement vs. bankruptcy?

Bankruptcy

Debt Settlement Agreement

New York

Asked on Jul 15, 2023

Debt settlement agreement vs. bankruptcy?

I am currently in a difficult financial situation and am looking at my options to get out of debt. I am considering both a debt settlement agreement and filing for bankruptcy, but am not sure which option is best for my situation. I am hoping to get advice from a lawyer regarding the pros and cons of each option, so that I can make an informed decision.

1 Attorney answer

Answer

Bankruptcy

New York

Answered 337 days ago

Jeffrey Z.

ContractsCounsel verified

Business Lawyer
Licensed in New York
Free Consultation

Bankruptcy is a very large part of my practice. I have had many clients that have attempted to use a debt resolution service without success. Unfortunately, they often pay a substantial amount of money to the service, their debts do not get resolved, they end up in bankruptcy anyway, and they do not get their money back. Aside from the difficulties in successfully completing a debt settlement agreement, there is also a tax issue. Forgiven debt is considered taxable income. You will receive a 1099 from any creditor that accepted a reduced amount to satisfy a debt. The result may be an income tax liability that you were not expecting. Debts that are discharged in bankruptcy are not counted as income.

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