I spoke with a lawyer about debt relief options and I was told I could either:

1.) File for chapter 13 or
2.) Stop paying any debts and wait until creditors sue and settle later.


Since 1982, multi award winning attorney Todd C. Esser has been leading the field, serving the community, and helping consumers just like you achieve success through trying financial times.

I am wondering what to expect if I chose option 2. I’m just extremely worried about the payment plan in chapter 13 and not sticking with that budget for 5 years. Any help would be appreciated. Thanks – K in Madison, WI

The determination may depend upon your income and expenses as to option number 1 and availability of resources to pursue a settlement with creditors under option number 2. If after evaluation of your income and necessary living expenses there is no net income available to fund a meaningful repayment plan, the chapter 13 option may not be feasible.

On the other hand, if your budget supports a chapter 13 plan, you have the protection of the bankruptcy court and will know ahead of time the likely result. Option number 2 gives you no protection and no assurance of any result. Additionally, do you have, or is there available to you sufficient funds to pose a settlement offer, if you were able to enter into settlement discussions with your creditors?

Please also keep in mind that settlement directly with your creditors will have TAX CONSEQUENCES and you will likely receive a 1099-C at the end of the year for the amount of the debt which may be forgiven.

Considering the uncertainty of result, that your credit score will be negatively affected and the additional problem of paying taxes on the debt if you are able to settle, you should strongly consider the chapter 13 option.

Here is a video we created talking about debt consolidation that might help as well:

[pb_vidembed title=”ESSERLAW LLC Video: What is Debt Consolidation?” caption=”” url=”https://www.youtube.com/watch?v=Ytir7BTw-XU” type=”yt” w=”480″ h=”385″]

Looking forward to your good financial health!

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