A debt settlement program or debt arbitration is considered successful when both the debtor and the creditor reach an agreement. The agreement is that the debtor will pay a lesser amount than is owed and this will be considered payment in full. This will not work as long as you continue to make the minimum payments due, as many do regularly in their credit card debt. But if you stop making any payments at all when the late fees and interest start to add up you will be able to discuss a settlement on the original amount. |
Do It Yourself or Hiring a Debt Settlement Company?
There are companies that can do this for the debtor. Many people prefer this because they are not sure enough of their ability to negotiate the right amount or they may feel ill at ease dealing with these problems. Some of the settlement companies will charge an upfront fee while others may charge a monthly fee. There are also those who charge after the settlement of the debt. They may get a percentage of the debt that is negotiated off the entire amount.
A debt settlement program differs from a debt consolidation program. The consolidation program will require that you take another loan to pay off the bills that are causing your financial problems. While this is beneficial for consolidating all your loans into one loan there are often stipulations to which you may not want to agree. Committing to an agreement to allow a foreclosure of your home to pay the loan if you default is one such stipulation.
This is because typically to get the loan you have to put up collateral which is often your home. Yes, you should get a lower interest rate but in the end if you cannot make the payments on this loan, you stand the chance of losing your home. Debt consolidation may be a good idea for some, especially with the state of the economy today. But jobs are not 100% secure and the possibility of losing your home is very real.
Is Bankruptcy An Option?
Bankruptcy is another alternative if you have gotten yourself in so deep there seems no way out of debt. However, the type of bankruptcy you declare is important. Chapter 7 will sell your assets such as your home to pay off your debts. So, you may end up losing your home using this method. Chapter 13 will allow you to keep your home and any other assets such as a vehicle if you make your payments to the bankruptcy court and the lender of your mortgage. If you default on these payments, the creditors can ask for a lift of the bankruptcy and file foreclosure or for repossession of a vehicle.
The disadvantage of a bankruptcy over a debt settlement program is the bankruptcy will stay on your credit report for 7 to 10 years. While in bankruptcy the debtor may not apply for credit cards or credit from any source without asking for permission from the bankruptcy court. This is not likely anyway because most creditors are leery about lending to someone who is in bankruptcy.
When it comes to debt consolidation, the impact on your credit may not be good. As a matter of fact, not all loan consolidation companies report your payments to the credit bureaus. So deciding between the options that are open to you can take some time and thought. With a debt settlement program normally the payments you make will show on your credit report even if they are settlement payments, it does show you made an effort, which is a positive thing when viewed by future possible lenders. For more insights and additional information about Debt Settlement Programs as well as finding many resources and options that are available to you right now today, please visit our web site at http://www.mybloginfosource.com/debt-settlement
Related Articles -
debt settlement programs, debt settlement, credit card debt settlement, debt consolidation,