Tuesday, October 4, 2011

How to Negotiate a Debt Settlement & Avoid Bankruptcy

Debt negotiation is a good alternative for those who are suffering due to huge debt burdens and considering filing for bankruptcy. Though “Avoid bankruptcy in any cost” has been a slogan among many Americans for years, a numerous people are now experiencing an immense financial burden, and thinking that bankruptcy is the only way out of this financial crisis. However, there is an effective alternative to bankruptcy. And that is undertaking a debt settlement program.

Always Avoid Bankruptcy

If your approach toward filing bankruptcy is that the court may strategically discharge your debt, the downside is that a judge may also penalize you. Depending on the filing that you may be entitled to make, bankruptcy can be a costly move, one that comes with court fees, insurmountable attorney fees, and much time spent in court, etc. However, if you choose to settle your debt, paying off your total debt load can be done very fast, with affordability, and in your financial pace.

Another hardship of filing for bankruptcy is that you may only qualify to file for Chapter 13. But, in exchange of no longer being responsible for repayment of the whole amount, this means that you will have to pay a fraction of your debt. The additional tradeoff of a bankruptcy filing is that it remains on your credit report for up to 10 years and makes it very difficult for you to obtain any loan in the future. In contrast, a debt settlement does not have the same long-term impact on a debtor’s credit score.

Debt Negotiation

These days, a larger number of debt-burdened consumers believe debt negotiation, ‘the process of achieving a debt settlement’, to be the best alternative to bankruptcy. In a debt negotiation program, a professional negotiator will negotiate with the creditors on your behalf in order to help you repay only a fractional amount of your entire debt.

The objective of a debt negotiation program is always to pay back the owed money either in installments or in a lump sum payment (often 40%-50% of the owed money). It is important, after paying the lump sum amount as agreed upon, that you make sure the creditor reports the settled debt as “paid in full.” This will help improve your debt-to-credit ratio, a major component of the consumer credit standing.

Thus, debt negotiation consummates an affordable payment plan and the debtor ultimately pays off the amount as agreed and no longer remains liable for repayment of the debt to the creditor.

Finding a Debt Settlement Negotiator

Professional debt negotiators can be found online. However, before appointing or enrolling with any, check out their credentials, get customer feedback, and ensure the negotiator does not have a large degree of customer complaints. As there are great companies out there, not doing proper research, you may stumble across fraudulent companies. So, ALWAYS do your due diligence and think twice before taking any step.