New York consumers who cannot keep up with their credit card debts might consider some kind of debt settlement. Debt settlement occurs when a person or someone on that person's behalf negotiates with a credit card company to pay off the debt in a lump sum for a lower price. However, some experts caution that if a person can qualify for a Chapter 7 bankruptcy, that is better than going the debt settlement route.
Debt settlement can be done by an individual, but there are also companies who do it. Both the National Consumer Law Center and the Consumer Financial Protection Bureau argue against working with a debt settlement company. However, there are circumstances under which working with a company may be better than doing so as an individual. People who are likely to become emotional, who are not assertive or who are not able or willing to do research beforehand might be better off using a company. If this is necessary, people should check with the Better Business Bureau and avoid companies that demand money in advance or offer to challenge debts.
Usually, forgiven debt is considered income for tax purposes and must be disclosed on a debtor's tax return. Another alternative to debt settlement is debt management, and this is often addressed by credit counseling companies.
Being deeply in credit card debt is stressful, and it can be difficult to fully understand all the options. People who are in such a situation may want to meet with a bankruptcy attorney in order to see whether filing for Chapter 7 would be more advisable.