Eliminate unsecured debt - how debt settlement programs compare to filing bankruptcy

Eliminate unsecured debt - how debt settlement programs compare to filing bankruptcy

Ever after the recession struck the US economy, the demand side as well as the supply side of the economy suffered. The consumers represent the demand side and the creditors represent the supply side. With recession, the consumers lost their jobs and failed to cover their expenditures. As a result of this, whatever money they had, they diverted the whole towards mere existence. The consequences showed up on their credits. They failed to repay their unsecured loans and became defaulters. This resulted in an increasing number of bankruptcy filings from consumers' end.

When a consumer files for bankruptcy, this is what happens:

* The consumer needs to first qualify for bankruptcy. This means that the consumer will have to clear the "means test". To clear means test, the consumer needs to have income level which is smaller than the minimum expenditure level required for handsome living, as described by the government. In case the income is greater, the consumer will fail the means test and will not qualify for bankruptcy.

* The consumers will have to face a number of legal issues and they need to visit court and be in touch with the attorneys.

* Those consumers who successfully file for bankruptcy will have to face severe consequences after filing. They will lose their credit score and they will also fail to get any fresh loans for a period of 7-10 years. This happens due to the fact that the report of bankruptcy filing shows up and stays on the credit history for that period of time.

* After those 7-10 years pass by the consumers get new loans but the rate of interest charged for them is higher than the usual consumers.

So, what happens in debt settlement?

* In debt settlement, there is no such qualifying criteria or means test to pass. The only requirement is that the consumers need to have an overall unsecured loan of $10k or more.

* Legal issues, if any, are dealt with by the professional negotiator dealing with the case. The consumer need not bother about the same.

* During settlement, the credit score of the consumer goes down but once the settlement process is over and the consumer repays the agreed upon sum of money to the creditor, the credit history becomes clean and the credit score jumps back to a good standing.

* Immediately after debt settlement, the consumers are eligible for fresh loans at normal market rates of interest.

Well, there is one thing that the consumers need to be aware of. The process of bankruptcy will eliminate the entire debt but settlement will eliminate a minimum of 50% and a maximum of up to 70% of the entire debt. The remaining amount is to be paid back to the creditor. Also, the method of bankruptcy is the most time consuming of all the relief methods available and the method of settlement has the shortest turn around time.

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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