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Los Angeles Debt Settlement Attorney

Debt Settlement vs. Bankruptcy

If you are struggling with debt, bankruptcy is not your only option. In some cases, it is possible to arrange a debt settlement with your creditors. However, we urge you to use caution before entering into such an arrangement. There may be tax consequences and other hidden risks that could leave you in worse financial shape than when you started.

The attorneys at RHM LAW LLP can help you explore all of your debt relief options. We offer you sound legal guidance, so you can make informed decisions about how you wish to resolve your debt problems.

Contact our bankruptcy attorneys in Los Angeles to take the first step in resolving your financial challenges.

The Dangers of Debt Settlement in California

There is a wide range of debt settlement companies out there, and they operate in different ways. Here is a typical scenario:

You enter into a debt settlement agreement and make monthly payments to the debt settlement company which they will hold in an escrow account. The claim is that, once you have built up a reasonable settlement amount in the account, the company will then reach out to your creditor to make a settlement offer.

The problem is that there is no guarantee your creditor will accept the offer. Meanwhile, you have been paying money to the debt settlement company while your debt problems continued to grow.

The difficulty is compounded if you have multiple accounts you are trying to settle. One creditor does not care what arrangement you have with another creditor. This is why debt consolidation services also fail in achieving true debt relief.

Tax Consequences for Debt Settlement in CA

If you do settle and your debt is reduced, the IRS will consider the reduction as income and tax you on it. This can leave you with a significant tax bill at the end of the year. The debt discharged in bankruptcy is not taxed.

For experienced legal guidance in your debt relief matter, consult with one of our Los Angeles bankruptcy attorneys at your earliest convenience by calling (213) 344-0043.


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Committed to making the process as stress-free as possible for our clients, our Los Angeles bankruptcy attorneys and dedicated staff will handle everything for you. From filling out paperwork through getting end results, we will work to help your case run smoothly and efficiently. We serve our clients in English, Spanish and Farsi.