What is debt settlement?
Debt Settlement is a process where the creditor and debtor both agree on a reduced amount as the payment in full of the due debt. A creditor will not agree for a debt settlement as long as the minimum monthly payment is being made by the debtor. If the debtor cannot make the minimum monthly payments and the due amount is increasing because of the late fees and interests, then the debtor may try for the debt settlement.
The borrower can try to negotiate with a creditor on his own with the help of a lawyer or he can take help of any debt settlement company. The debt settlement company will charge the borrower a certain amount of money as their fees but these companies are very helpful. So the borrower can seek debt help from any company. After the debt settlement the borrower can pay off the debt with affordable monthly payments.
Debt settlement can be done on unsecured debts like credit card debts, personal loans etc. So with credit card debt you can enjoy credit card debt reduction through debt settlement. Thus the debtors can actually save thousands of Dollars. There are many companies out there in the market but it is better to choose a reputed and trusted debt settlement company. Wish a happy debt free life.
Get Out of Debt in 5 Easy Steps:
The most difficult part of getting out of debt is starting the process. It is a human trait that we all put off what we need to do. If you will start the process, the rest will seem easier, although maybe frustrating at times. Here are five steps that can help you get started.
Desire: The motivation for getting out of debt has to come from a desire to get to a better place than you are now. Use that desire to help you take the actions that you need to in order to get started today.
Organize: This step has a lot of work to it (probably the most in the whole process). You must gather the details of what you owe and to whom and get into one place. Writing it down on paper is a good idea, but if you are good at using a word processor or a spreadsheet, those are good as well. The details of what you are going to need include the names of the companies to which you owe money, the phone numbers, account numbers, and balances owed.
Choose: In this step you must choose how you will get out of debt. Are you going to pay the creditors yourself, or are you going to enlist the services of a debt consolidation or debt settlement company? You can do it yourself and be successful, but you might not know some of the ins and outs of dealing with creditors which can give you an edge.
The next thing to consider is if you have the money to pay off your creditors in full or if you will make payments. If you need to make payments and want to go it alone, then set up schedules with each creditor. Otherwise contact a Debt Consolidation company and they will do this for you. If you have enough cash to pay lump sums to your creditors, then you can contact them directly and work out an amount to either bring the account current or pay it off and close it. You can also get a debt settlement company to perform this part for you.
Create: Create your plan from your decisions above. Make sure that if you choose to use debt consolidation or settlement companies that you fully investigate them to make sure that you are getting a good one. Once you have your plan in place there is only one more step remaining.
Work: This is easiest part of the program, because if you choose to use automatic deposits from your paycheck, you can put paying back your creditors on autopilot. Even if you are unable to do that you only have to monitor your payments and make sure that they are made on time.
Comparison Between Debt Settlement and Bankruptcy:
Debt settlement and bankruptcy both are debt relief options. These options are chosen when an individual had stuck deep in debt and looking to get out of it. When a person is knee deep in debt meaning he/she has no sources of income to clear the debt in a fair way. Hence, one has to look for debt relief options to become debt free.
Debt settlement and bankruptcy, each has its own advantageous and disadvantageous. Before taking decision to choose one particular, it is very important to know about each option and how one differs from other.
The main difference between debt settlement and bankruptcy is that, debt settlement is an agreement between you and lender that is taken care of out the court steps whereas the bankruptcy is legal procedure that is taken care of attorney inside the court steps to discharge liability.
If bankruptcy is filled perfectly and one who files qualifies for it, the court can order or enforce the creditors to discharge the debt. In general there are two types of bankruptcies for consumer to file. They are chapter 7 and chapter 13.
Chapter 7 bankruptcy is to be filled when you want to eliminate debt and chapter 13 to restructure debt into a repayment plan based on how much the debtor can repay, not necessarily the whole amount the debtor owes. According to earlier laws of bankruptcies laws, a person who files bankruptcies will manage to discharge whole debt that he incurred till then but recent laws that amended do not allow to discharge some debts like student debt secured by federal government, taxes etc.
In addition, the bankruptcy filled will be reported to credit rating agencies and that will stay on your credit report for at least 10 years. Bankruptcy on your credit report will have negative impact on your credit score and as a result your future credit will be impacted.
On the other hand, debt settlement is a process that is carried out of court agreement made between debtor and creditor. The agreement is made for the benefit of both the debtor and creditor.
With debt settlement, the debtor will not manage to discharge the debt as in case of bankruptcy instead a repayment plan that is in favor of all the creditors of debtor will be made. For debt consolidation to work, it requires that each and every creditor must agree to debt settlement and its repayment plan terms.
Debt settlement in the same way as bankruptcy will be reported to credit rating agencies. Debt settlement will remain on your credit report for 7 years. It is natural that credit score will be impacted in either of the option and if you are in such a position to opt either of the option, then you are already half way down of your credit score and at the same time with any option total debt will not be discharged.
Since the impact of debt relief options is much less than bankruptcy and they are easier for you to handle the procedure. Choosing the debt relief option enables the lender to get some amount from you instead of walking away will all the debt.