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Debt Settlement And Bankruptcy
Debt settlement is the process of negotiating your outstanding debt when you can no longer afford to make the payments. In most cases, this will need to be done by an attorney or other professional organization, although it is possible to do debt settlement on your own.
Save yourself a lot of time and trouble by hiring a debt settlement company to negotiate your debt, rather than trying it on your own. But choose a company with a good reputation and history.
Debt settlement is often used during credit counseling to try and avoid bankruptcy. Debt settlement, in general, is the process of reducing the total amount of debt owed and setting up a fixed repayment schedule. For example, if you owe $40,000 in credit card debt, a good debt settlement company could negotiate that debt to as low as $20,000 and establish a 24 month repayment plan. This could save the debtor $1,000's per month!
Debt settlement is commonly used during credit counseling before filing for bankruptcy. But consumers must be very careful, because companies often falsely claim to obtain a 80% reduction in debt, when 10%-30% is more realistic. Also, the new bankruptcy laws have left the doors wide open for scammers and companies who have not for profit “fronts” to make you think you're getting free help. Many of these companies are just out to get your money, so they make false claims and never deliver. A more realistic debt reduction is 20-30%, so if you see someone advertising 80% debt reduction, you should be very careful and do plenty of research before hiring a company making such high claims.
In the event you do want to find a debt settlement professional to work on your behalf, make sure you do your research and see if they have actually helped others in the past. A good way to do this is by checking their local Better Business Bureau and by doing a search on Yahoo and Google.
If a good debt settlement is not reached, you may want to consider filing for a chapter 7 bankruptcy, where the debt is eliminated. But keep in mind that this will require a liquidation of assets.
"In many cases, debt settlement can leave you worse off that if you had done nothing at all. Debt settlement companies should be evaluated carefully to verify that they are legitimate." Debt settlement can be very helpful and certainly can eliminate the need for bankruptcy, so it's something you should seriously consider. But keep in mind, debt settlement will also effect your credit. Credit counseling and debt settlement will also effect your credit for 7 years, so when choosing between bankruptcy or debt settlement, make sure you understand all the facts and long term effects both with have on your credit.
By using our form on the left of this page, we can put you in contact with local companies and attorneys who can provide the answers you need about bankruptcy, credit counseling, and debt settlement. There is absolutely no cost and no obligation, so get started immediately.
Filing for bankruptcy doesn't have to be scary, just make sure it's your best option before moving forward.
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