Is Debt Settlement Good For You?
Written on May 24, 2011 by George Geoghegan
Many people are living their live under the heavy burden of debts. Some of them find ways to get out of this outstanding debt, while others remain in search. There are many choices and safe doors available for people living with huge debts. However, it is not necessary that all these ways are ideal and suite all people. Few of these ways include bankruptcy and debt settlement program.
Chapter 7 Bankruptcy
Many people file for chapter 7 bankruptcy and they prefer this solution over debt settlement plan. Chapter 7 bankruptcy helps you to get a fresh start without debts. All your outstanding dues leave you forever and the cost of filing for bankruptcy ranges only from $1,000 to $2,000. With this cost debt settlement services are expensive than bankruptcy. Debt settlement services charge huge fee. Some debt settlement agencies charge from 14% to 18% of the overall debt that you owe, whilst many others charge a large percentage of the debt settlement. There is no doubt that filing for bankruptcy eliminates all your debts and helps you to financial freedom, but still it is not recommended. It is because it is not always a good option to get rid of debts. It leaves a long lasting effect on your credit history and restricts you from taking out loans and make major purchases in future. It is recommended to you to search your options before selecting bankruptcy as your reliever.
Debt Settlement Plan
For many people debt settlement appears to be a good and effective plan to get rid of debt. People more than often confuse debt settlement with credit counseling and debt consolidation. With debt consolidation plan, people can borrow a certain amount of money to get out of smaller debts, while people get repayment plans from credit counseling. These repayment plans help people to get lower interest rates to become able to pay off their debts over a particular period of time. However, with debt settlement, borrowers work with a professional company which guides them to stop paying off all payments to save sufficient amount of money. Simultaneously, debt settlement agencies negotiate with your creditors to make settlements that are beneficial for you. Normally, a debt settlement plan takes up to 18 months. However, personal financial situation of the borrower decides the duration of the debt settlement plan.
Things to Consider
If you have decided to take help from a debt settlement plan then you should take certain things into consideration. Make sure you do not pay the fee of debt settlement plan right after the enrollment. First you should save enough money to use for settlement negotiation. If you don’t do this then it could harm your credit score. Don’t settle a debt for less because it would hurt your credit rating.
Lawsuit Against Borrowers
Many creditors can request a lawsuit against borrowers as they use law firms to collect their money. If a lawsuit is established against you then you will have to face various legal restrictions from court that can be very trouble making and stressful.
On the whole, its good to consult debt settlement agency to let them help you, but remember don’t allow them to take advantage from your weaknesses.
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- Chapter 13 Bankruptcy: Pros and Cons
- Legal Problems of a Debt Settlement Program
- Understanding the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
- Ways to Repay Credit Card Debt in Quick Time
- How to Consolidate Your Own Debt
