Debt Relief Solutions - Why Many American Consumers Are Choosing Debt Settlement Over Bankruptcy
In the past, consumers who struggled to meet their minimum payments were forced into filing bankruptcy. However the new bankruptcy laws that were passed in 2005 led to a few other debt relief options one of them being debt settlement.
Online, July 5, 2010 (Newswire.com) - After one of the worst recessions in history, many American consumers find themselves struggling with debt. The lending standards over the past 20 years have been nothing less than irresponsible and many consumers are left with massive bills that they simply cannot pay. It can take nearly a lifetime to pay off credit card debts by simply making the minimum payments. In the past, consumers who struggled to meet their minimum payments were forced into filing bankruptcy. However the new bankruptcy laws that were passed in 2005 led to a few other debt relief options one of them being debt settlement.
Debt settlement finds a way to negotiate with the lenders to waive off a certain percentage of the outstanding balance with the borrowers. A portion of the amount is paid off at an agreed upon settlement amount. This process can be very effective if a third party settlement services company is employed. They negotiate hard with the companies to eliminate between 40-60% of the original balances. A shocking revelation says that last year alone there were 1.5 million bankruptcies filed. It is a serious problem for the lenders as it is their business to reap profits and not bankruptcies. Lenders usually do not even get a single penny when bankruptcy is filed. Hence, they find that negotiating with a debt settlement company might find the best results in getting back at least the 50% of their principle amount.
Opting for debt settlement does not come without consequence. Consumers will experience an increase in collection calls and also a drop in their credit score in the short term. Debt settlement programs typically last between 2-4 years at which time the consumer will not be making payments to their creditors but rather paying into a savings account until it builds up to an agreeable settlement amount. The average settlement is negotiated for 50% of the balance so if a consumer had $50,000 in unsecured debt they would save up funds until they had around $25,000 and then attempt to settle the debt.
This process is only intended for consumers that are experiencing a legitimate financial hardship and are struggling to meet their minimum monthly payments. A legitimate debt settlement service will have connections with all the major credit card companies, banks, medical institutions, and government agencies to negotiate a successful settlement deal. There are however several predatory settlement companies on the market that look to do nothing make take consumer's fees. It is very important that consumers do research on the particular company they are considering and check both the Better Business Bureau and The Association Of Settlement Companies (TASC) to verify their authenticity and track record.
If a consumer is over $10k in unsecured debt and is currently experiencing a financial hardship then debt settlement can be a viable option to eliminate debt and avoid bankruptcy. As long as they understand the risk and know how to locate a legitimate settlement company then this process can make financial sense. Consumers who enter into a debt settlement program must have enough patience to stick with the program for its entire duration, typically 2-4 years, if they want to successfully settle their debts.
To locate Legitimate Debt Settlement Companies that have proven themselves in successfully settling consumer debts check out the following link:
