Ventura, CA asked in Collections for California

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

Related Topics:
4 Lawyer Answers

William John Light

  • Riverside, CA
  • Licensed in California

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.

Timothy Denison

  • Consumer Law Lawyer
  • Louisville, KY

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

Theodore Allan Greene

  • Sacramento, CA
  • Licensed in California

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

Harlene Miller

  • Irvine, CA
  • Licensed in California

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.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.