Law Office of Timothy E. Wilfong, LLC

You Deserve a Fresh Start - Phoenixville, PA

Call us at 610-935-5555 for a Consultation

Helping Clients Since 2008

Law Office of Timothy E. Wilfong, LLC
20 S. Main Street, Phoenixville, PA 19460
Straight Talk on Debt Settlement 
 In some cases you may be able to reach a reasonable settlement with a debt collector.  However become educated on the services and outcomes of debt settlement companies.  Please read the information below for an explanation and alternatives to debt settlement outfits.  
 You Deserve a Fresh Start

What is Debt Settlement

Although the Law Office of Timothy E. Wilfong only offers debt settlement services on a case by case basis, we have provided the following information to help you understand the pitfalls of the debt settlement process and recommend that you consider a Chapter 13 Bankruptcy Payment Plan or a Chapter 7 Straight Bankruptcy as possible alternatives.


Going through a Debt Settlement Company could be a higher risk strategy that has the potential to leave you financially far worse off.   The typical technique that many of these companies recommend is that you actually stop paying and default on your credit cards.  Instead of paying creditors, you make monthly payments directly to the Settlement Company.  Once a significant amount of money is built up in an escrow account, the Settlement Company will contact your credit card companies and make low ball settlement offers.


There are several drawbacks to this strategy.  First, when you stop payment on credit cards your credit score will be adversely affected and those credit card companies may bring collection lawsuits against you.  Once a credit card has a judgment against you, it can direct the sheriff to freeze and garnish your bank accounts, levy and auction your vehicle, and even hold an auction at your door step in order sell your personal belongings. Learn more about collections lawsuits.


A Chapter 13 payment plan is different because credit card companies are forbidden from harassing you or maintaining any collection actions during the Chapter 13 Plan period, which normally last three to five years.


In addition, it will take probably 6 to 24 months to build up enough funds in the Debt Settlement Company's escrow account to make any settlement offers. As stated above, in the meantime the non-stop credit card collection calls will continue and lawsuits filed against you.  Your credit card interest rates and penalties will sky rocket. The worst part is that even with sufficient funds to make settlement offers, the credit card companies have no legal obligation at all to consider or accept settlement offers. 


In comparison, in a Chapter 13 the credit card companies are required by law to receive less than the full debt according to the confirmed plan language.


Worst yet is that even when the credit card company accepts a settlement offer it will issue a dreaded 1099-C "discharge of indebtedness" tax form to you.  To add insult to injury, this means that you may have to include the amount of the debt discharged on your tax return as income.  In other words, the you may have to pay income tax on the amount of credit card debt forgiven! 

Another advantage in a Chapter 13 is that a debtor never pays tax on debt discharged through the bankruptcy.


Please call for a no obligation, consultation to evaluate your specific financial circumstances to determine if a Chapter 13 payment plan will work for you at (610) 935-5555.



Law Office of

Timothy E. Wilfong, LLC

20 S. Main Street

Phoenixville, PA 19460

Phone-(610) 935-5555

Fax-(610) 680-3910