Considering Bankruptcy? Know Your Options

Considering Bankruptcy? Know Your Options

Many consumers have given into the principle that, Money isn't everything; But there is VISA and MasterCard." Though credit may seem like a free ride at first, it is anything but. With minimum payments come extra finance charges, which can make debt into a prison rather than a personal tool.

If you find yourself sitting at a crossroads between bankruptcy and remaining in debt until you die, looking into bankruptcy alternativesmay bring you some relief. The two primary alternatives are debt settlement and credit counseling. Because there is no one-size-fits-all solution, it's important to grasp what each one entails to know whether or not it is a great fit for you.

Debt Settlement. A more aggressive approach, debt settlement involves negotiating with a consumer's creditors in order to secure a settlement for a percentage of the current payoff balance. Debt settlement programs typically last from 12-36 months, and are an excellent tool when a reputable company is involved. A legitimate company will never charge fees before real services are rendered. Fees should only be collected after at least one of the consumer's accounts is settled. Ideal candidates have around $10,000 in unsecured debt and either struggle to make just the minimum payment or have already fallen behind. Clients typically notice a decrease in monthly payments normally made to creditors and an increase in cash flow. Because creditors would rather accept a settlement than recover zero funds during a bankruptcy, settlement is becoming a more viable option. Consumers should be aware, however, that their credit will take an initial hit, and will have to be rebuilt after the debt is paid off. Yet, most great debt settlement candidates do not have great credit to begin with, so debt settlement is a great opportunity to start with a clean slate.

Credit Counseling. Rather than securing a settlement, counseling works directly with a consumer's creditors to lower the amount of charged interest. These programs last for around 4-5 years, and do save some money on the amount of interest owed. If this seems too good to be true, it most likely is. The majority of these companies are actually set up by the creditors themselves in order to recover as much of the debt as possible; the majority of their profits go straight back into the creditor's pockets. Further, a third party assistance (TPA) mark will show up on consumers' credit scores these can be just as deadly as a bankruptcy! For consumers who may be considering this option, a better method would be to check out negotiatemyrate.com, a site that offers tips and success stories on negotiating lower interest rates with creditors.

If you're struggling to find a way out of your current unsecured debt, don't let fear, worry or stress keep you from finding a way out. Learn more about your debt relief options.

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