Although everyone that is in serious debt would like to avoid bankruptcy, like never before, Americans are experiencing immense financial burdens. And unfortunately, many think bankruptcy is the only way out of their debt crisis. However, an effective bankruptcy alternative is within reach - the undertaking of a debt settlement program. Debt settlement is a practical solution for folks that have suffered a financial hardship, have a large debt load, and are on the brink of a bankruptcy filing. But, why choose this debt elimination solution over bankruptcy?
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Always Avoid Bankruptcy
Doing a bankruptcy filing under Chapter 13 is no laughing matter. Although you are using the bankruptcy court to strategically discharge your debt, you're also inviting a host of out of pocket expenses. In this costly move, you will incur court fees, attorney fees, and a host of unknown expenses, such as calendering additional court dates.
Through Chapter 13 you're no longer responsible for your entire debt. Nonetheless, you're required to repay a portion of your debts within 3 to 5 years. And missing a court-ordered payment to the bankruptcy trustee, who is responsible to distribute payments to your creditors, can cause your court case to be dismissed.
Finally, the trace of a bankruptcy filing will remain on your credit report up to 10 years, a stigma that would make it exceptionally difficult to obtain future loans or credit. Consequently, the long haul ramifications of bankruptcy can bear on you a heavy financial toll.
Debt Settlement - a Better Approach
In comparison to bankruptcy, debt settlement is a bankruptcy alternative without all of above consequences of a bankruptcy filing. On the upside, choosing to settle your debt can drastically reduce your debt balances. You also have the opportunity to pay off what you owe expediently and within your own financial pace. Conversely, if you hit another bump in the road, you can slow down the pace of your repayment plan.
One of the beauties of a debt settlement program is that a professional negotiator negotiates with creditors on your behalf. This saves you the inconvenience of having to deal on your own with the grievances of pestilent debt collectors.
A debt settlement program helps you avoid bankruptcy, helping you repay your unpaid debt at a largely reduced, lump sum payment. Similar to Chapter 13, it helps you satisfy your financial obligations at a settlement amount that equates to pennies on the dollar. Typically, the settlements reached are for 30%-40% of the total balance owed. Ultimately, you consummate a more affordable payment plan, and once the settlement is paid as agreed, you are no longer liable for the debt.
Additionally, unlike bankruptcy, debt settlement does not have a 10-year negative impact on your credit score. Once the lump sum settlement is received, the creditor will report your settled debt as "settled", "paid in full" or "settled for less than full amount." Although, this can remain as derogatory reporting on your credit report, the physical effect of paying off a debt and bringing it to a "zero" balance is a vital credit scoring factor. It contributes toward the "debt-to-credit ratio" credit scoring category, which makes up 30% of your credit score.
Finding the Right Debt Settlement Company
To locate a good debt settlement company, it can all be done online. However, be very careful with your research. Before hiring one, check out their credentials. Get customer feedback if you can. Finally, ensure that the company does not have a large degree of customer complaints.
Failing to do your homework, you can stumble across a mediocre debt settlement company, or one with a greater interest in taking your money than giving you good service. So, exercise due diligence. And, beforehand, always compare prices. You may find a wide disparity in debt settlement fees from one service to the next.
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