For some people facing debt problems, bankruptcy is not the right solution. There are other options available. Oftentimes, an attorney can help you settle your debt for ten to thirty percent of the total balance owed. To find out all of the options available to you, schedule a free consultation with attorney James Ealley today at 410-535-2200 or

Bankruptcy Alternatives

There are often several options to consumers who are overwhelmed with debt, including bankruptcy. The most common bankruptcy alternative is debt settlement. With debt settlement, negotiations take place with the creditors in an attempt to have them agree to settle the account for less than what is owed. Creditors will often agree to settle an account for 20% to 50% of the total balance owed. There are many factors that determine the percentage a creditor is willing to accept to settle an account, including: the financial condition of the borrower, the age of the debt, and the aggressiveness of the creditor. There is also no guarantee a creditor will accept a settlement for less than what is owed.

Typically, the best settlements occur when the borrower can afford to pay the settled amount in a lump-sum. When a lump-sum is not feasible, a creditor may accept monthly settlement payments. However, the total settlement amount is often less when the settlement is paid in installments.

Settlement negotiations can be frustrating and time-consuming. Often, creditors are rude and make inaccurate statements concerning the law and what are acceptable collection practices. This is where an attorney can help. An experienced attorney can use their experience to cut through the unfounded threats of a creditor and get to the bottom line of a settlement.

Debt Settlement or Bankruptcy?

Depending on the situation, debt settlement can be an option to avoid bankruptcy. It is best for people who do not qualify for a Chapter 7 Bankruptcy due to having too many assets, or have too much debt for a Chapter 13 Bankruptcy. However, for those who do qualify for bankruptcy, bankruptcy is typically the better option. The reasons for this are many:

  • The are no guarantees as to what percentage each creditor will accept as a settlement
  • While settlements are being negotiated and paid, your credit report will continue to take negative hits
  • Debt settlement is much more expensive than bankruptcy
  • There can be tax consequences to debt settlement. Forgiven debt is considered taxable income.
  • There is a Court protection in debt settlement. While in debt negotiations, creditors often will continue collection efforts, including phone calls, letters lawsuits, garnishments and levies. In Bankruptcy, once your case is filed, all collection efforts against you must stop.

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