Personal debt relief - how to eliminate over half of your unsecured debt and avoid bankruptcy

Personal debt relief - how to eliminate over half of your unsecured debt and avoid bankruptcy

Personal debt relief can be obtained in a number of ways. The most widely used method of debt relief until now was the traditional method of bankruptcy filing. By filing bankruptcy, the consumers managed to get rid of their entire debts. However, these consumers who filed for bankruptcy faced serious financial problems in the future. They lost their credit scores and they failed to get new credit from the creditors for about 10 years. This happened because of the fact that the report of bankruptcy filing showed up on the credit history of the consumers for that long and whenever they applied for new credit, the creditors declined their request by looking at the history. This is a serious problem for the consumers.

After recession, the consumers suffered because of loss of jobs and they started filing for bankruptcy to get rid of their debts even though they knew that bankruptcy has a number of problems associated with it. The sudden increase in the number of bankruptcy filings caused some serious problems for the creditors as well. The creditors lost billions of dollars and they themselves became financially weak and unstable. Because of this, new restrictions were put on the method of bankruptcy filing and debt settlement was promoted by the government.

For debt settlement to work, the consumers are required to have a minimum of $10k of unsecured debts and the debts are required to be consolidated. If a consumer satisfies these conditions, he or she is then required to hire a professional debt settlement company. The negotiator from the company will then send a letter to the creditor and state that the consumer will not be able to repay the debt in full and is seeking debt settlement. The reasons for such a failure to repay the whole debt will also be attached with the letter.

The negotiator then asks the consumer to go delinquent and once the consumer follows this advice, the creditor waits for 90-120 days and then sells off the debt to a collection agency for 20 cents to 30 cents on each dollar. The negotiator contacts the creditor at that point of time and offer a better deal. This new deal from the negotiator will be an offer of 30-50 cents per dollar and a lump sum payment of the whole amount if the creditor wipes off the remaining amount of the debt. The negotiator also threatens the creditor that the consumer will be filing for bankruptcy in case the creditor declines the offer.

From the creditors point, the deal will be a better one because it will mean greater returns and that too in bulk. The creditor will agree to the deal and will wipe off at least 50% of the debt that the consumer has. The consumer will then have to repay the remaining amount of the money to the creditor in one single shot and get rid of the debt and at the same time avoid 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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