It might if you don’t have much debt, but for most people a Chapter 13 bankruptcy provides more benefit than using a debt settlement program. With a Chapter 13 bankruptcy you can’t be sued by your creditors while you’re making payments and the debt is frozen at the time you file. No interest or late fees can be added to the debt. In addition, unless you’re able to settle with ALL of your creditors, you will have wasted the money you spent on the few who do settle while still having to file bankruptcy. Filing Chapter 13 bankruptcy also provides other advantages over debt settlement like:
- avoiding the tax consequences of debt forgiveness
- possibly “cramming down” loan values and interest rates on secured loans,
- possibly stripping off second mortgages and
- paying tax debts, mortgage defaults and student loans that no debt settlement program can resolve.
In a Chapter 13 bankruptcy, unsecured creditors who fail to file a proof of claim also have their debts discharged without any payment, unless the debt itself is not dischargeable.
