With a large number of Americans in debt, many people look
for shortcuts for a way to avoid a bankruptcy filing. Many of these same people
will try and use debt settlement as a way to fix their debt problems. If the
ads on TV are correct, they should be able to eliminate their debt for 50% of
the balance. Don't get me wrong, debt settlement has its benefits when used for
the proper situation. If a debtor has $30,000 in credit card debt, to have a
debt settlement company negotiate the debt down 50% would leave the debtor
owing $15,000 plus a fee to the debt settlement company. If someone is having
problems making their payments on the $30,000 in credit card bills, how would
they ever come up with about $18,000 to pay this off? Where debt settlement is
good is for an individual that has a low income and has about $5000 in credit card debt and doesn't have the ability to pay it. They might be able to afford
to pay off half of this not the whole thing. In this case, debt settlement
would be the best form of debt elimination for this person.
It's very common for a bankruptcy attorney to have people
walk in that were failed customers of one of these companies and were unable to
ever come up with the amount asked for. Typically, it goes bad quickly for
these debt settlement clients. When someone is using this to eliminate their
debt, the creditor has no obligation to abide by any of the rules. In fact,
they even have the ability to cancel the program midstream making the debtor
once again liable for the entire balance. This is why for large amounts of
unsecured debt; filing bankruptcy is the only way to go. Filing Chapter 7 bankruptcy
gives the debtor the power of the U.S. Bankruptcy Court to protect them once
the bankruptcy petition is filed. They also will have a bankruptcy attorney to
stand front and center to block the flaming arrows from the creditors. While
debt settlement has its place in debt elimination programs, before using one an
individual should first consult a bankruptcy attorney to see which is best.
I personally consider debt settlement as a better option compared to bankruptcy filing. Bankruptcy filing will help you get rid of all your unsecured debts and you won’t be personally liable for these debts. However, bankruptcy filing will remain in your credit report for 7-10 years depending upon the chapter of your filing and will lower your credit score by around 200 points. Moreover, creditors/lenders view bankruptcy as a severely negative item in the credit report and may not consider giving a loan to the concerned person. Debt settlement, on the other hand, won’t have a drastic affect on your credit report. Moreover, as you’re paying off a certain part of your debt, the credit report will mention that it is paid as settled. Moreover, it will help you avoid extra charges and unfair collection practices and you will be liable for paying only a single payment.
ReplyDelete