Categories
Debt Relief

Debt Negotiation – Is Debt Settlement Better Than Bankruptcy?

Debt settlement means that a lender has agreed to settle less than the entire amount you owe as full reimbursement. It means that collectors can no longer hound you for your debt and instead you do not have to fear that you may become sued over your debt. However, debt settlement does ruin your credit. You are not actually getting out of debt but only paying a fraction of it.

This is important to note because debt settlement is often used as an alternative to filing for chapter seven bankruptcy. People who file for chapter seven bankruptcy usually end up losing most or all of their assets, including their homes, which means they cannot ever buy another home. This is why it is often better to use debt settlement as a debt relief option instead of using bankruptcy. Of course, this also means that you will have credit card debt after debt settlement and probably some extra unsecured debt that you cannot repay.

With debt settlement, your creditors stop calling you, but they will still collect the remaining debt after you have settled it. This means that the total amount that you have to pay each month is lower than it would be if you filed for chapter seven bankruptcy. This is one of the major advantages to debt management programs. These plans require you to make monthly payments into an account. The company then makes a one time payment, usually less than what you would pay for your monthly minimums, and distribute the money to your creditors. Instead of making multiple payments to different companies you are only required to make one payment to the debt management company.

Because creditors do not receive any of the money that you pay in this way, they are more likely to settle your accounts. A bankruptcy filing results in nothing but financial losses for the creditors. By settling with your creditors you can avoid this extra expense. In addition, a debt negotiation gives you more time to work out a budget that will help you to pay off your debt and live within a reasonable income.

One thing to remember when using debt settlement as a debt relief option is that you must hire a reliable debt relief company. Credit card companies do not have the same interests as a debt settlement company. If you try to settle your accounts on your own, you may not reach the goal you desire.

To learn more about debt settlement and other debt relief options, register for a free debt relief webinar. When you attend this webinar you will learn how to get a debt settlement quote and what you need to qualify. Then you will receive a sample settlement agreement so you can see what it entails.