Debt Workout

Sometimes people experiencing financial difficulty do not want to file bankruptcy.  In such case, it may be possible to accomplish a financial workout with your creditors.

A word of caution is in order about this option.  First, there are many debt management companies out there who claim to have the ability to negotiate your debt and solve your debt problems.  Many times, these companies do not succeed.  In fact, many go out of business or wind up in receiverships themselves as they are unable to deliver to their customers what they have promised.


Because many times these plans work only if all the creditors agree to a structured payment plan.  That means that if you have 10 creditors and 70% accept the terms, you still have three of your creditors who wind up suing you.  As an attorney, we have many people who have come to our office asking us for a bankruptcy, after the had already paid a debt management company thousands of dollars.

In reality, the best debt workout plans are those in which the client has a source from a relative or friend to help them satisfy debt in a lump sum.   It is possible in some of these cases to settle your accounts for as little as a third of the actual balance due, sometimes even less.  But, it usually requires the entire settlement amount to be paid within a short period of time.  A creditor will seldom agree to reduce the balance due and allow it to be paid off over a period of time.

It must also be kept in mind if your obligation is settled for less than 100% of the full payment due and owing, your account may be reported to the Internal Revenue Code, Section 6050P and to the credit bureaus to indicate “Settled For Less Than the Full Balance.”  If the remaining balance is equal to or greater than $600.00, credit card companies are required by federal law (Internal Revenue Section 6050P) to report this amount.  They may send you a Form 1099-C, and you may have to pay taxes on the difference between the amount due and the amount you settled for.  (On the other hand, debt that is canceled in a bankruptcy is generally done so without any tax consequence.)


Hiring an attorney is an important decision which should not be based solely on advertising. The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

The attorneys of Murano & Roth, LLC assist clients throughout Bergen County and northern New Jersey including Oradell, Emerson, New Milford, Paramus, River Edge, Dumont, Haworth, Bergenfield, Westwood, Cresskill, Hillsdale, Harrington Park, Maywood, Demarest, Closter, Rochelle Park, Tenafly, Teaneck, Fair Lawn, Hackensack, Ridgewood, Saddle Brook, Teterboro, Glen Rock, Norwood, Englewood, Ho Ho Kus, Woodcliff Lake, Elmwood Park, Park Ridge, Northvale and Lodi.

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