Q: What options does one have for debt and credit relief before bankruptcy? Or is it an option worth pursuing?
too much debt, not enough income, poor credit, no real assets
A: You can negotiate with your creditors for reductions in principal and payments with the threat of bankruptcy if they don't agree. Otherwise, it's looking like bankruptcy.
A: There are many debt relief companies who you can consult. However, Many wind up still having to file bankruptcy in spite of the debt relief.
William John Light agrees with this answer
A: Be very careful of "debt settlement" advertisements. Some are okay but most are not. You could do better yourself with some research. Or you could engage a bankruptcy attorney to attempt a debt settlement and if it doesn't work you move right into a bankruptcy petition. Just know that you MUST have some upfront money to settle debts. They will take less but almost never will they agree to a payment plan so you must have liquid cash ready. In their minds you have already proven you can't make payments successfully.
Peter Maurice Lively agrees with this answer
A: I agree with Mr. Greene's comments. Settlement with creditors can be difficult and the most successful ones usually require a lump sum payment rather than monthly payments. Also you should be aware that settlement of a debt can create "forgiveness of debt" income - the amount not paid to the creditor can result in a 1099 tax form being filed which must be included as income on your tax return. The biggest issue I see with debt relief companies, or debt consolidation companies, is that proper analysis is not made to consider whether payments being set up for settlement are feasible - which requires an analysis of income and monthly necessary living expenses to determine what you can actually afford to pay. I recommend talking with an experienced bankruptcy attorney who also can give you advice and analysis of the non-bankruptcy options. Many of us do that and can be very beneficial to assist you in making a decision as to how to proceed.
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