Choosing bankruptcy or settlement for debts is a big decision and should not be undertaken lightly. There is a difference in debts that should be noted before making this decision as well. Two kinds are typically the type that will be owed – unsecured debt and secured debt.
Unsecured Debt
If you’re dealing with unsecured debt then you have department store credit cards, regular credit cards, medical bills, or anything else that isn’t attached to an asset. So if you aren’t paying on these someone doesn’t have the option to come take a piece of collateral away to satisfy the debt.
If you’re dealing with a creditor it’s possible to satisfy these debts for 50% of the total amount. In fact, most creditors will be willing to take .30 to .35 cents on the dollar. There are others who will only go as low as .50 or .55 cents. It really depends on the company and their willingness to accept those terms.
Secured Debt
Debt that is considered “secured” means there is something of value in your possession that can be taken away. The best example of this would be your vehicle. However, things such as child support, alimony, mortgages, and student loans also qualify.
When payments are not made on secured debt the creditors can take from you. Granted, there are laws around it, but if you owe on a vehicle the bank can come repossess it. Same goes with anyone who can’t afford their home. If the other areas like child support, alimony, and student loans aren’t paid then you could see your income tax refund intercepted. This could go on for years until the debt is satisfied.
What it comes down to is if you’re able to at least get a 40% to 60% reduction on these you might be able to pay your bills. This is a huge advantage, but for some it still won’t matter. If there is nothing else left then bankruptcy can be considered. Basically the way it works is there are reduced interest rates and then the creditors see a division of the funds dispersed throughout all of them.
Bankruptcy is considered a Last Resort
Are you prepared to have this on your credit report for up to 10 years? Well, when you utilize bankruptcy it can help your situation now, but future options could be turned down due to it. Plus it’s public record, so if someone is searching for information on you there is a good possibility they will see it.
A boss may be notified if money is to be deducted from wages. For those who work in a career sector that requires a security clearance or background check, this could mean the loss of their job depending on the employer. These reasons are often why most people do not file bankruptcy unless there is no other option. The embarrassment that many people feel about the situation they are in is enough without advertising their personal financial situation for everyone to see.
The Truth About Debt Settlement
When considering bankruptcy or settlement, there are a few things that need to be clarified if settlement is going to be the alternative. First, some people claim that settlements can often be procured within 30 days. This is not the norm; it is more like 4 months to 6 months (or more). If the time starts extending to a year or 18 months, this is the time to worry about whether there will actually be a settlement or not.
Your credit definitely takes a beating here, but it doesn’t hurt as bas as someone who files for bankruptcy. The recovery is a lot shorter, which can put you back on track. Just keep in mind that they can still call you while the process is taking place.
The amount you actually agree to depends on your creditors. If they are stubborn it’s possible you won’t receive a settlement option initially. While this is true they will come to their senses eventually or else they won’t get any money from you.
As with any transactions, beware of who you are dealing with as some companies have advertised that they can “guarantee” a settlement. Others have stated that a debt settlement for less than the balance can be accomplished and that it will not affect your credit. The term “guarantees” when it comes to debt settlement are not plausible. The outcome is entirely dependant upon the arrangements between you and the creditors.
If you have troublesome credit card debt problems and you can’t decide whether bankruptcy or settlement is the right path for you, please visit www.hoffmanbrinker.com for the Internet’s most reliable source of information on credit card debt solutions.
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- Creditors Have Their Own Policies Regarding Debt Settlement
- All You Need To Know About Bankruptcy
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