subject: Why Credit Card Debt Negotiation is a Better Alternative to Bankruptcy [print this page] Why Credit Card Debt Negotiation is a Better Alternative to Bankruptcy
In order to understand why credit card debt negotiation is a better alternative to bankruptcy, it is important that we analyze the pros and cons of each one of these two options individually. Both the methods have a set of good and bad effects which affect the consumer, creditor and the economy as a whole. Let us go deep inside both the options and find out!
Bankruptcy: Let us begin with bankruptcy filing and see what happens when a consumer files for bankruptcy.
When a consumer files for bankruptcy, the consumer can eliminate the debt completely.
As soon as the consumer files for bankruptcy, the credit score of the consumer goes down and then the debtor loses credibility.
Once the debtor loses credibility, the consumer is unable to get any further credit for the next 7-10 years because during that period, the report of bankruptcy filing continues to show up on the credit report! After 7-10 years, the consumer becomes a sub-prime consumer and can get credit only at higher rates of interest.
After successful filing of bankruptcy, the creditors lose their liquidity and incur loss. They are unable to cover their costs and slowly approach the verge of bankruptcy.
As the creditors roll back towards bankruptcy, the economy takes the hit and rolls further back into recession.
Debt settlement: Let us now look into the option of settlement and see what it has to offer to the consumers, creditors and the economy.
When a consumer opts for settlement, he or she can eliminate at least 50% of the debt and up to 70% of the debt. It is true that the debt cannot be eliminated in full!
During settlement process, the credit score of the consumer goes down but the consumer regains credibility after the settlement is over.
The consumer remains a prime consumer and thereby can receive further credit at market rates of interest.
The creditors on the other hand get back a part of their liquidity and they can cover a segment of their cost. The remaining part of the cost is covered by the stimulus cash present in the market.
Since the creditors manage to maintain their equilibrium, the economy slowly steps out of recession.
It is because of this reason that the option of debt settlement is considered to be a better alternative to bankruptcy filing.
There are many debt settlement companies out there and not all of them are legitimate. That's why it's so important for consumers to use debt relief networks. These networks offer free help to determine what the most appropriate debt relief option is for you.
