Debt Settlement
When Bankruptcy Isn't the Right Fit
Sometimes the right move is settlement, not filing. We negotiate directly with creditors to resolve one or two stubborn debts, often for less than you owe.
For more than 30 years, the Law Offices of Patrick L. Cordero have helped clients in matters big and small with the same attention every situation deserves. Many people don't know how to approach a debt they can't pay. It can be difficult to talk to anyone about it, even an attorney. As your lawyers, it's our duty to help. We are attentive to the situation, big or small. Don't assume the problem has no solution. Below are the situations we handle most often when bankruptcy isn't the first choice.
Lawsuits
Most people don't want to be sued, even when they acknowledge the debt is owed. You may be current on everything else, and one debt or lawsuit is the only problem. If you're facing a lawsuit, whether it just started or you're in the middle of it, we can guide you to a resolution.
The resolution may be to negotiate a lower amount, lower the interest, lower the attorney fees, or arrange a payment plan you can actually afford. At times you may have a defense you didn't know you had. If so, we'll identify it and pursue it. If this is your situation, we will be glad to listen and, more importantly, to hear you.
Single-Debt Negotiations
How many times have you come across one debt, old or new, that you just can't close? Your credit cards are current, your rent or mortgage is current, your car payment is up to date, but this one debt keeps following you. The collection company still calls every day, still sends letters with threatening language. Sound familiar?
Call us for a free consultation. We'll listen to your needs, talk to the creditor directly, and try to reach an agreement that gives you peace of mind. We have been doing exactly this for clients in your situation for over 30 years.
Miscellaneous Debt
Over the years clients have brought us debts that don't fit the normal categories of credit cards or loans. Maybe the debt isn't enforceable, or the creditor can't sue you, but you're still being harassed. Maybe it's a debt with a neighbor over a shared fence, or a friend whose boat got damaged on your property. We've seen the full range, and we usually have a plan for you before you finish describing the situation.
How Debt Settlement Works
Debt settlement means negotiating with a creditor or collector to accept a lump-sum payment or a reduced payoff to resolve the account. While negotiations are underway, federal and Florida collection laws still protect you from harassment, so it helps to know your rights against debt collectors. A typical settlement follows these steps:
- Review the debt. We confirm who owns the debt, the balance being claimed, and whether you have defenses, such as a balance you already paid or charges the creditor cannot support.
- Make a realistic offer. We contact the creditor or its attorney and propose a lump sum or a reduced payoff that fits what you can actually pay.
- Get it in writing before you pay. The agreement should state the amount, the payment deadline, and that the payment resolves the account. If a lawsuit is pending, it should also say how the case will be closed.
- Keep proof. Save the written agreement and proof of every payment. If the account is ever sold, reported incorrectly, or pursued again, that paperwork is your best defense.
Debt Settlement vs. Bankruptcy: What to Weigh
Settlement and bankruptcy solve different problems. At your free consultation we compare both and tell you honestly which one fits. If you want a head start, our free means test calculator gives a quick estimate of whether you may qualify for Chapter 7. Here is what to weigh:
- Lawsuits can continue. A creditor may still sue you while you are negotiating or saving for a settlement. Filing bankruptcy, by contrast, triggers the automatic stay, which stops most lawsuits, collection calls, and garnishments.
- Credit impact. Settling for less than the full balance typically hurts your credit, and the account is often reported as settled rather than paid in full. Bankruptcy also affects your credit, so the better choice depends on how many debts you are facing.
- Taxes on forgiven debt. Forgiven debt may be reported to the IRS on Form 1099-C and can be taxable income unless an exception, such as insolvency, applies. Debt discharged in bankruptcy is generally not taxable. Talk with a tax professional before you settle a large balance.
- How many debts. Settlement usually works best for one or two debts when you have, or can raise, a lump sum. When many debts are past due, Chapter 7 can discharge most unsecured debt in a few months, and Chapter 13 can combine them into one court-supervised plan.
Common Questions
Debt Settlement Questions, Answered
What is debt settlement?
Debt settlement is an agreement in which a creditor or collector accepts less than the full balance, as a lump sum or a reduced payoff, to resolve the account. It usually works best when you have one or two problem debts and can raise a lump sum or keep up with a short payment arrangement. We negotiate directly with the creditor or its attorney on your behalf.
How much will a creditor accept to settle a debt?
There is no set amount or percentage. What a creditor will accept depends on factors such as who owns the debt, how old it is, whether a lawsuit has been filed, and whether you can offer a lump sum. No one can promise a specific result, but we review those factors with you before making an offer.
Can a creditor still sue me while I am trying to settle?
Yes. Negotiating does not stop a creditor from filing a lawsuit or pursuing one that is already pending, and a judgment can lead to garnishment of your wages or bank account. If you are served, do not let the deadline to respond pass. Filing bankruptcy is different because it triggers the automatic stay, which stops most lawsuits and garnishments.
Will I owe taxes on a settled debt?
Possibly. The forgiven portion of a debt may be reported to the IRS on Form 1099-C and can count as taxable income unless an exception applies, such as insolvency, which generally means your debts were greater than the value of your assets right before the debt was forgiven. Debt discharged in bankruptcy is generally not taxable. Because the rules are technical, talk with a tax professional before you settle a large balance.
Will debt settlement hurt my credit?
Usually, yes. Settling for less than the full balance typically hurts your credit, and the account is often reported as settled rather than paid in full. The missed payments that usually come before a settlement also affect your score. We help you weigh that impact against the cost of leaving the debt unresolved.
Is debt settlement better than bankruptcy?
It depends on how much you owe and to how many creditors. Settlement can make sense for one or two debts when you can raise a lump sum. When several debts are past due or a lawsuit is moving quickly, Chapter 7 or Chapter 13 bankruptcy often provides broader protection through the automatic stay and the discharge. We compare both options honestly at your free consultation.
Do I need a lawyer to settle a debt in Florida?
No, but it can help. An attorney can check whether the creditor can actually prove the debt, spot defenses or collection-law violations that may give you leverage, and make sure the settlement is in writing and, if you have been sued, that the case is properly closed. Once you have an attorney, collectors generally must communicate with your attorney instead of you.
Come to Us for Help
You deserve our attention and time so we can give you the best options, solutions, and plans available. You have nothing to lose: the meeting is free, with no hidden agenda. At minimum, you walk out with the confidence that someone understands you and a real plan for resolution.
Related Practice Areas
Stop Debt Collections
When collection calls and harassment have crossed the line, bankruptcy's automatic stay stops them immediately.
Chapter 7 Bankruptcy
When debts are too large to settle, Chapter 7 discharges most unsecured debt in a matter of months.
Chapter 13 Bankruptcy
Restructure all debt into a single court-supervised payment plan.