subject: New debt relief tactics - debt relief options to consider before declaring bankruptcy [print this page] New debt relief tactics - debt relief options to consider before declaring bankruptcy
Declaring bankruptcy to get rid of debt has been used for long to eliminate unsecured debts. However, the recent recession created some problems for the whole economy and it was found that the situation was adversely affected by increasing number of bankruptcy filings. As people lost jobs due to recession, they became defaulters and tried to get rid of their debts using this traditional method. However, once the consumers filed for bankruptcy, they faced severe financial troubles which are definitely not the best that the consumers expect. With bankruptcy filing, the consumers lose their credit scores and they fail to get new credit from any creditor for 7-10 years and this is because of the fact that the credit history of the consumers continue to show that report of bankruptcy for that period of time. It is because of this reason that the consumers looked for alternatives to bankruptcy. There are some alternative methods which can help the consumers to get rid of their debts without facing such severe consequences. The methods are described below:
The method of debt management is the simplest thing that the consumers can do on their own. The consumers need to arrange their debts in order of highest interest rate to lowest. Once done, the consumers then need to create a new budget where they need to get rid of unnecessary expenditures and save the money. Then the consumers need to add up that saved money to the amount kept for debt repayment and start repaying with the debt which has the highest interest rate. This will help the consumers to avoid fast accumulation of debts due to high rates of interest.
The next simplest thing that the consumers can do is to go for debt consolidation. With debt consolidation, the debt of the consumers in not wiped out. Only thing that happens is that the rate of interest on the debt and some other costs of the loan like over limit charges, late fee etc are removed and thereby reducing the money repayment amount by some extent. The consumers need to hire professional debt consolidation firm where the consolidator will actually negotiate with the creditors for such reduction of interest and elimination of costs. The consumers will then pay the consolidators hired for the job who will then distribute the money among the creditors.
The final and the best thing that the consumers can do is to go for debt settlement. In settlement, at least 50% and up to 70% of the debt is eliminated and the remaining amount is paid back to the creditor in bulk. The negotiation with the creditor is done by the professional negotiator from the firm that a consumer hires. The consumer can also decide to negotiate with the creditor on his or her own but the amount of elimination that can be achieved is significantly low. The maximum that can be attained by self-arbitration is 30%.
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.
