Debt SettlementIf you are behind on credit card payments and other debts, it is highly likely that you receive a barrage of letters and phone calls from collectors and creditors. It is also likely that these communications are offering debt settlement arrangements for you to pay less than the amount you originally owed to stop the collection attempts. However, you likely know that bankruptcy is another option to stop collections and discharge debts. Many people often wonder whether it is better to settle debts with collectors or to file for bankruptcy.

Unfortunately, there is not one clear cut answer to this question as it depends on the specific circumstances of each individual case. Luckily, an experienced St. Louis bankruptcy attorney Kenneth P. Carp can help analyze your situation and decide which action will best solve your financial struggles.

Settling Debts

Debt settlement involves making an agreement with your creditors to pay a lower amount than you actually owe and, in return, that creditor agrees to forgive the complete amount of the debt. This may sound like a great solution since you get to pay less, however there are negative aspects to debt settlement for some.

Debt settlement often requires you to pay a lump sum or to make large payments in a short period of time. If you are unable to keep up with minimum payments, you are likely unable to make even larger payments immediately. If you try to save the money by foregoing regular payments on other obligations, your credit score may decrease significantly. Additionally, you must report any amount you saved on taxes, so your tax liability could go up substantially.


Bankruptcy can also affect your credit, but may actually be less serious than months of late payments and charge-offs. Filing for bankruptcy will immediately halt all collection attempts for the duration of your case. Additionally, any qualifying debts will be discharged completely and require no payments from you. A bankruptcy trustee may also have to liquidate some of your property to pay creditors, however there are exemptions available for your keep certain types of property.

In short, there are pros and cons to both debt settlement and bankruptcy. At the Law Offices of Kenneth P. Carp, we handle both debt relief and bankruptcy cases and can help you decide which is right for you. Call us today at 636-947-3600 for assistance.

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