Take Caution with Debt Consolidators and Credit Counselors

Debt Consolidators and Credit Counselors

When you are struggling daily to pay your bills, help from anyone starts sounding better and better. That desperation is exactly what debt consolidation companies and credit counseling agencies prey on when they recruit new customers. Bankruptcy attorneys like Lawrence ‘D’ Pew want you to know the facts about these enterprises and how they profit at your expense with unsatisfactory results.

Bankruptcy attorneys in Arizona know that debt consolidation companies are too costly.

These debt settlement organizations disparage bankruptcy attorneys in Arizona and elsewhere for one purpose – to dissuade individuals from seeking professional help from experienced bankruptcy attorneys. In Arizona, credit counseling agencies claim that debt consolidation is the smarter way to get out of debt. These operations claim that credit counselors will negotiate away your debts for less than it would cost to file for bankruptcy.  But nothing could be further from the truth!

This may be shocking to some, but debt settlement companies typically cost three to ten times as much as bankruptcy attorneys in Arizona charge to file under Chapter 7, Chapter 11, or Chapter 13. At the Pew Law Center, we know that debt consolidation companies typically charge many times what bankruptcy attorneys in Arizona charge to file for chapter protection under the U.S. Bankruptcy Code. The result of representation from our bankruptcy attorneys in Arizona is comprehensive debt relief and a reliable fresh start under federal law.

 

Bankruptcy attorneys in Arizona warn that debt settlement has significant tax consequences.

Take Caution with Debt Consolidators and Credit Counselors

Debt consolidation companies are not responsive to their clients’ IRS issues and may make a bad tax situation much worse. A credit counseling agency is focused on debt settlement, it is unconcerned with the long-term financial future of its clients. The agency’s negotiated settlements lead to tax liabilities that individuals are unprepared for and, certainly, do not need added to their financial struggles.

Herein lies the hidden tax problem. Any debt that was forgiven by a creditor becomes income to the debtor, upon which he or she must pay income tax. In the event that a settlement is negotiated with one of your credit card companies, then, you will incur a tax liability (absent some special circumstance).

Assume, for example, that you owed $30,000 on your credit card, but the creditor settles for $15,000 through negotiations with the debt consolidation company. You might be satisfied with that settlement, at least until the tax bill arrives. The creditor must notify the IRS of the amount settled and send you a form 1099-C for the cancellation of the $15,000 debt. In this example, the settlement just added $15,000 to your income which must be reported to the IRS and appropriate income tax assessed. As Lawrence ‘D’ Pew has often said, you are much better off owing a credit card company money than owing the IRS back taxes. When you have an unpaid tax liability, the IRS has many powerful enforcement tools – they want the tax money, and they want it right away.

Your bankruptcy attorneys in Arizona at the Pew Law Center are always very concerned about your financial future. When your debts are settled by our bankruptcy attorneys, in Arizona you will never owe taxes on the amount that was forgiven by creditors!

Bankruptcy attorneys in Arizona speak with debtors dragging through endless consolidations every day.

If you are under the impression that debt consolidation will happen swiftly, you are mistaken. In fact, credit counseling agencies take a very long time to achieve any results – from six months to two years, or longer. During that time, maybe one or two credit card companies have negotiated, while all of the other creditors are still demanding payments. After years under this consolidation scheme, the debtor may still owe thousands with little results from the counseling agency. Effectively, the individual debtor has spent whatever reserves he or she had to pay the credit counseling agency’s absurdly high fee of $5,000 to $9,000, or more. While the consolidator is attempting to negotiate one settlement at a time with creditors…

The relentless creditor phone calls continue.

The collection letters keep arriving.

The garnishments, repossessions, foreclosures, and lawsuits continue unabated.

There is a far better solution to your debt problems.

Even if you have already signed on with a debt consolidation company or credit counseling agency, we can help. Contact the bankruptcy attorneys in Arizona at the Pew Law Center today. When you call us at 480-719-1479, we will schedule your FREE VIP Bankruptcy Consultation. You have absolutely nothing to lose and everything to gain, including a brighter future and the financial fresh start you deserve.