With the current economic climate many people are looking into ways to reduce their overwhelming debt. Debt settlement programs offer individuals with a decent income but are having trouble making their monthly payments on credit cards, medical bills, personal or payday loans, and other forms of unsecured debt, a way to decrease the amounts owed. The actual settlements on unsecured debts can vary but a savings of up to 50%-60% is common for many. In a nutshell, the client makes payments to their bank account while the debts are being negotiated. The program's fees are deducted from the account every month until paid in full to the settlement company, but the funds to pay the creditors remain in the account until settlements have successfully been negotiated. This all sounds good to the debtor who is concerned about doing the right thing by paying back some of their debt while keeping their credit scores somewhat intact.
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The advertisements you see from these companies urging you into debt settlement to avoid having to file bankruptcy by design give the impression that debt settlement won't damage your credit like a bankruptcy filing. This, however, is not the truth. Many people have unfortunately discovered that working with debt settlement companies usually hurts their credit because they get further behind on their payments, and have larger past due balances while their debt is in negotiations. This ultimately severely affects their credit score even if a deal is reached. A charge off will show up on the credit report which has a huge negative impact. Also, many people working with these settlement companies find out the hard way that they get sued or face a judgment by their creditors. A debt settlement company cannot protect the debtor from this. The creditor will then have to turn to bankruptcy after they have spent thousands of dollars and wasted precious time trying to avoid filing bankruptcy.
Filing Chapter 7 bankruptcy is common for many individuals in financial distress. In a Chapter 7 bankruptcy all of the debtor's unsecured debts are wiped out. Unsecured debts include credit cards, medical bills, payday and personal loans, etc. In most cases, with an experienced bankruptcy attorney, the debtor does not lose any of their possessions. The debtor also can enjoy the peace of mind that comes from the automatic stay. The automatic stay goes into effect the moment the bankruptcy case is filed with the court. This court order literally stops all contact and collection attempts by the creditors. That means no more nasty phone calls, threatening letters, and harassment by aggressive collectors. Any law suits, wage garnishments, and judgments are also stopped by filing bankruptcy. This is a tremendous advantage for the debtor to re-evaluate their situation and plan their financial future.
Getting answers to your questions needs to be a priority before you make any decisions regarding your financial problems. A consultation with a bankruptcy attorney is a great place to start. An attorney will let you know if you qualify to file bankruptcy and if this is the best route for you or if you should look into debt consolidation. Trying to erase your debt can a stressful and humbling experience, however, getting your life back on track being debt free is well worth it.
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