Debt settlement act 2010 - why debt settlement has made declaring bankruptcy less attractive

Debt settlement act 2010 - why debt settlement has made declaring bankruptcy less attractive

The debt settlement act 2010 has made bankruptcy declaration a less attractive one. The are several financial troubles associated with bankruptcy filing and it is because of this reason that the consumers are now hesitant about filing bankruptcy. There is yet another severe issue to deal with. With more and more bankruptcy filing, the creditors become financially weak. This is because of the fact that the creditors lose all their money that they have forwarded as credit to any consumer when that consumer files for bankruptcy. As the number of bankruptcy filings increased in leaps and bounds, it was found that the creditors lost billions of dollars and they failed to maintain a stable financial situation. This led to a position where the entire economy failed to maintain financial equilibrium. The result was that the Federal government came up with new debt settlement act which ensured that the option of bankruptcy filing was pushed back and that of debt settlement was embraced by the consumers and the creditors.

As per this act, the creditors who agreed to settlement deals offered by the consumers will be allowed to use the stimulus cash which has been released by the government in the market. The creditors will be allowed to use this cash to cover the costs which they fail to cover due to the loss that they bear from debt settlement. Also, the creditors will be allowed to enjoy tax breaks which means that the creditors who agree for debt settlement deals will have to pay less taxes because of the loss of income in form of interest earning due to settlement deals. With these policies the creditors gained some confidence and they opened up for settlement. According this act, the consumers are required to have a minimum of $10k of debt to avail settlement.

Debt settlement has made bankruptcy less attractive because of the fact that the consumers do not face financial troubles after settlement. In bankruptcy, the consumers lose credit score and they fail to get new credit from the creditors for 7-10 years. This never happens in debt settlement. During settlement, the credit score goes down but once settlement is over, the credit score is revived and consumers become eligible for new loans just after settlement. Also there are less or no legal hassles in settlement. If there are some legal issues, they are handled by the negotiator dealing with the case on behalf of the consumer. It is because of these reasons that the consumers are now much more attracted towards settlement compared to bankruptcy.

Debt settlement is a viable option to filing bankruptcy and is becoming increasingly popular amongst Americans with over $10k in unsecured debt. Creditors are ready to negotiate. You can literally eliminate 50% of your unsecured debt with a settlement.

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