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Attorney Dave Falvey Norwich Bankruptcy

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Brief Background

Which is Advisable? Debt Settlement or Bankruptcy?

Bankruptcy is a constitutional right provided to all the people or companies who have acquired debts that have turned out to be, for one reason or another, greater than their financial ability to pay them.

Bankruptcies can be classified into two: individual’s bankruptcy and company bankruptcy. In Chapter 7 individuals get clemency of their debts outright. In Chapter 13 individuals formulate a “Plan” whereby they make arrangements on set payments of their debts to the creditors over a period of time.

Not all chapters of bankruptcy are meant for everyone. In general, people who own moderate property will prefer to file for Chapter 7 while people with larger asset holdings, and higher levels of salary, will file Chapter 13.

Debt consolidation allows you to make decisions on how to settle down your debts accordingly without following any court order. The insolvent may not lose all their assets in the debt payment process. However, in the case of bankruptcy filing, the insolvent have no say over their assets.

In the process of debt settlement a debt settlement company is hired to sell all the assets of the insolvent party and use that money to settle down the debts. Sometimes this is more economical than filing bankruptcy.

How reliable are the Settlement company?

Most debt settlement companies keep advertising their good reliable services in the media. It’s hard to identify the companies which are reliable vs the counterfeits unless you get the information from the clients who have employed them before. If you live in Connecticut you can do a search yourself through ct.gov website (link) for a reliable debt settlement company to verify a license and even report scammers if you come across them. The statement ‘buyer beware’ applies in this case.

What is The Debt Settlement Process?

Will You Pay Income Tax While Carrying Out Debt Settlement?

Most people do not know that there could be significant tax implications associated with debt settlement. Tax implications may arise when there is debt forgiveness during the process of settling debts. This debt forgiveness is taxable income for that particular tax reporting period.

Does Debt Settlement Affect Your Credit Reports and Credit Score?

Yes. In most cases the credit score is reported in a negative status. This gives little opportunity for the credit score to increase during the process. Sometimes the decrease would be even after the debt payment process.