Many New Jersey residents’ financial situations have become precarious since the pandemic began due to layoffs, business shutdowns and other repercussions. While things are improving, many people have seen missed payments stack up.

The question they’re asking is, “What is the best way to deal with that debt?” Is bankruptcy or debt settlement the best option? The good news is that either approach can bring much-needed relief. But deciding which course to take can be challenging.


Debt settlement can be a good option as long as you can afford payments and your debts are at least 90 days past due, but it’s a better option if you’re several months behind. Some debt settlement companies claim to have great results. But many analyses show these companies are often expensive and ineffective, and the Consumer Financial Protection Bureau reports hundreds of consumer complaints since 2014.


If you decide on the DIY approach, make sure you negotiate directly with the creditor and not a collection agency. Here are four steps to take:

  • Assess if it’s a good fit: If you are at least three months behind on payments, determine whether bankruptcy or credit counseling may be a better way to resolve debts. Also, verify that you have enough money to settle and, last but not least, make sure you are a strong negotiator.
  • Understand the terms: You’re working to settle your debt as a percentage of what’s owed – 40% to 50% may be realistic. But understand precisely what you’ll pay and how it will be reported on credit reports.
  • Make an informed decision: Negotiating with creditors can be a long and exhausting process. It might take several calls and weeks or months to find a plan that works for both parties. Never agree to a deal you can’t afford.
  • Get it in writing: Before you agree to anything, get a hard copy of the terms and credit reporting details. Once you finalize the agreement, make sure you don’t miss a payment.


While negotiating directly with creditors might seem like a thrifty approach to reducing overwhelming debt, some people can pay more in the long run as creditors are often manipulative and use high-pressure tactics to craft a more favorable deal for them.

Experienced bankruptcy attorneys consider all options for reducing a person’s debt as each situation is unique. A knowledgeable lawyer knows how to negotiate with creditors for a payment plan you can afford. While bankruptcy may be the most realistic option, a reasonable attorney will consider all available methods to find the best fit. You can schedule a free initial consultation with Law Offices Of Michael P. McGuire LLC by calling 732-704-7331 or sending an email.