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March 1, 2011

Comparing Debt Settlement to Bankruptcy

Author: admin - Categories: Bankruptcy News, Debt Relief Tips, Featured Debt Articles

When things are looking bad financially, you may be faced with a tough decision: Do you file for bankruptcy? Do you try and reach a debt settlement? What are the differences between the two? Knowing how both a debt settlement and a Chapter 7 bankruptcy can affect you is important, especially if you want to take the path that causes you the least financial damage. Both the debt settlement program and bankruptcy have benefits and drawbacks, and here we’ll go over some basic information comparing debt settlement to bankruptcy that will help you decide if it comes to that. The legal counsel for both options is similar. Many bankruptcy lawyers also offer debt settlement services. In the past, people would just get an equity loan after a bankruptcy discharge but the laws and guidelines have changed in recent years.

Debt settlement is essentially a negotiation with a creditor in order to reduce the amount that is owed on a debt in exchange for a lump sum paid to the creditor. Negotiating debt can often reduce it to anywhere between twenty-five and seventy-five percent of the debt, which can be a substantial amount. However, this amount must be paid as a lump sum, or in some cases, over the course of a short period of time (a month or two). Debt settlement can only be performed on unsecured debts, such as credit cards and medical bills.

Bankruptcy, on the other hand, takes a number of different forms. The most common type of bankruptcy for individuals is Chapter 7 bankruptcy, in which all non-exempt property owned by the person in debt is sold, and the proceeds are given to the creditors. This process is also known as liquidation. Chapter 7 bankruptcy has the advantage of allowing the person in debt to start fresh relatively quickly, and is often used by individuals with very large amounts of debt and few assets. Because bankruptcy is certainly more damaging in terms of loss of assets and credit, most people will attempt a debt settlement before declaring bankruptcy.

If you are in financial trouble and want to avoid bad credit in the future, a debt consolidation loan is often a sound option. Debt settlement should certainly at least be considered before jumping to bankruptcy, as Chapter 7 bankruptcy can have far-reaching repercussions that stay with you for a long time. However, failing to pay a debt settlement can be even more damaging. Consider all of your options and try some comparison shopping for debt settlements before making your final decision, as doing the right thing for you and your family should be a top priority.

September 21, 2009

Consumers Warming up to Debt Settlement for Credit Card Debt Relief

Author: admin - Categories: Bankruptcy News, Consumer Debt News, Credit Card Debt Articles, Debt Settlement News

Debt settlement and the debt negotiation industry has grown significantly in this weak economy.  The available credit has all but dried up for American consumers seeking unsecured credit lines yet the interest on their credit card debt continues to rise.

With incomes decreasing nationally and the unemployment teetering at 10%, many consumers no longer have the ability to pay back their unsecured creditors that hold their credit card accounts.  Most of these people are delinquent on their credit card bills and very few qualify for a traditional debt consolidation loan, because if they own a home, they likely lost their equity during the housing crisis.

Consumers are considering bankruptcy, credit counseling and debt settlement that negotiate reduced credit card balances if funds are offered to pay off the credit card debt.  More and more people are comfortable with the debt settlement, because it allows them to become debt free in 12- 18 months.  Credit can be reestablished quicker after debt settlement than a bankruptcy, because the chapter 7 and 13 bankruptcies are reported by Trans Union, EquiFax and Experian for seven to ten years.

June 4, 2009

Debt Settlement Debt Management or Bankruptcy

Author: admin - Categories: Bankruptcy News, Consumer Debt News, Credit Market Updates, Published Debt Relief Articles, credit counseling - Tags: , , ,

For those consumers who can no longer to afford minimum credit card payments, Ethan Ewing, president of Bills.com offers tips to help consumers understand their odebt relief ptions for help, including: “Now that credit card reform legislation has passed, it’s a great time for consumers to take control of their debt,” said Ewing . “To do so, consumers need to understand the available debt relief options.”

Debt settlement. A debt settlement company works on consumers’ behalf to lower principal balances due, often obtaining savings of 50 percent of the total debt. The firm does not make monthly payments to creditors, but rather negotiates with the consumer’s creditors while the consumer accumulates funds for the settlement. Debt settlement firms charge consumers a fee for their services, typically a percentage of the debt enrolled or a percentage of the debt reduced.

Consumers who persist with a debt settlement plan can resolve their debts in two to three years at significantly lower cost than that of a debt management plan. Debt settlement typically provides better repayment terms than a Chapter 13 bankruptcy filing and does not leave a permanent bankruptcy judgment on one’s record.

Debt settlement may have a negative impact on credit ratings and profiles and is best suited for consumers in serious financial hardship who cannot afford to make minimum payments on bills and who cannot afford the higher monthly obligation typical debt management programs require.

Debt management. Debt management companies, also known as credit counseling agencies, maintain pre-arranged agreements with credit card companies to lower interest rates on a consumer’s existing debt to a creditor-issued “concession rate.” Debt management companies collect a monthly fee from consumers, as well as revenue from the credit card companies called “Fair Share” payments.

In debt management plans, monthly payments decrease, but principal amounts owed do not. Consumers who are able to continue with the payment plans typically can pay off debt in approximately five years. Debt management plans also require higher monthly payments than debt settlement programs, and are best suited for individuals who are facing a less-severe financial hardship than a typical debt settlement customer.

Bankruptcy. Bankruptcy Attorneys concur that BK’s can leave a severe negative impact on a filer’s credit rating for many years. Credit repair is not as easy as some debt counselors may lead you to believe. Under bankruptcy reform enacted in 2005, it is harder and more expensive to obtain than it used to be. Under the new law, fewer people can eliminate most consumer debt by filing Chapter 7 bankruptcy, taking more people to Chapter 13 filings. Chapter 13 requires consumers to pay back debt on a repayment plan (which can take up to five years), while still suffering the negative repercussions of a bankruptcy on their credit reports and public records. Generally considered a last resort, consumers considering a bankruptcy filing should speak to a bankruptcy attorney licensed in their state.

Read the complete press release online at http://www.emediawire.com/releases/debt/credit/prweb2493574.htm