A lowered economic situation and the explosion in the real estate market bubble has forced borrowers to the breaking point so they aren?t able to make the payments on their credit cards and consumer debt. For people in this situation trying to find a way to fix their problem, they often decide the only thing they can do is decide between assorted debt relief possibilities. These possibilities include counseling, consolidation, bankruptcy, and settlement. Out of these, debt settlement and filing for bankruptcy are what most people chose because of the pros in regards to getting rid of their existing payments and the amount they can reduce their existing debt.
For clients, the two most used bankruptcy types are Chapters 7 and 13. Out of these, Chapter 7 gives users a more superior outcome and it still gets rid of most, if not all, of the existing debt. Before the bankruptcy code was overhauled in 2005, Chapter 7 bankruptcy was very popular due to that very reason. After that, a court now makes the decision as to which type of bankruptcy is the best for the customer depending on the outcome of a means test, which must be done prior to getting a bankruptcy.
A means test is basically something that evaluates how much money a filer makes and what kind of expenses he has. This is then measured up next to debt redemption standards decided by IRS regulations. Based on these regulations, if the filer doesn?t meet up to the income guidelines, he is allowed to file for bankruptcy under the auspices of chapter 7. But, it takes meeting very strict guidelines to get a chapter 7. If the means test says the person is able to put as low as $100 to pay off the bills, then the person will be given the option of filing for a chapter 13 bankruptcy. In both scenarios, the borrowers must pay for and receive credit counseling and budget analysis. Even though Chapter 13 allows a bit of relief on a person?s monthly bills, it?s not as generous to consumers as Chapter 7 and has several disadvantages that make a lot of borrowers decide they don?t want to go with this method. The main negative of a Chapter 13 is that after the terms of the filing are set, the borrower?s finances may be ruled over by a trustee of the court. Most people don?t like to have an outsider involved with their finances all the time, so this makes getting a Chapter 13 very unsatisfactory and usually the borrower decides to try debt settlement instead.
Debt settlement or negotation is the new kid on the block as far as debt-handling options go. It offers many very drastic and bold advantages to entice debtors into using the service over other more traditional options. Debts bundled into a settlement often have a reduction of up to fifty percent in payment rates, which takes a huge amount of immediate pressure off of people struggling to pay back their loans. Many different kinds of debts can be rolled into a settlement, from medical and credit card to utility bills. Settlement processes can also reassure lenders that they'll be getting at least some of their money back, and informing them that you have a settlement underway will reassure them, discouraging aggressive legal measures against you.
Settlement will generally result in an overall debt reduction of fifty percent, but it can climb as high as almost three-fourths of your total debt in exceptional circumstances. Combined with the reduction in monthly payments, this results in less financial pressure, allowing you to pay things back and get back to zero more quickly for a fresh start. Most settlement payment processes will run for no longer than four years, but within that time period are reasonably flexible according to the needs of the debtor. This may seem like an extremely short amount of time for large loans such as mortgages, but the loan and payment reductions allow this kind of time limit to be practical.
Debt elimination programs can reduce outstanding balances by 40 to 70%, depending on the specific creditor. In general the average account included in a settlement will be reduced by 50%. The process provides added security for assets that represent a security interest. By reducing payments and eliminating a major portion of unsecured debt relieves pressure on secured assets. Debt settlement is often combined with mortgage loan modifications to help homeowners reduce their total payments toward debt and get for new mortgage terms. Most debt elimination programs terminate within 48 months, the same account with minimum payment could take over 20 years to payoff. The settlement of accounts allows for borrowers to begin the process of re-building their credit scores faster than bankruptcy which can remain on a consumer?s credit report for up to ten years.
This article has spent a fair amount of time praising debt settlement and pointing out the disadvantages of bankruptcy. But the truth is, there is no one right procedure that fits all people in all circumstances. You should analyze your situation either on your own or with the help of a financial expert, and then make a decision about what procedure is most likely to give you the best possible outcome. - 31377
For clients, the two most used bankruptcy types are Chapters 7 and 13. Out of these, Chapter 7 gives users a more superior outcome and it still gets rid of most, if not all, of the existing debt. Before the bankruptcy code was overhauled in 2005, Chapter 7 bankruptcy was very popular due to that very reason. After that, a court now makes the decision as to which type of bankruptcy is the best for the customer depending on the outcome of a means test, which must be done prior to getting a bankruptcy.
A means test is basically something that evaluates how much money a filer makes and what kind of expenses he has. This is then measured up next to debt redemption standards decided by IRS regulations. Based on these regulations, if the filer doesn?t meet up to the income guidelines, he is allowed to file for bankruptcy under the auspices of chapter 7. But, it takes meeting very strict guidelines to get a chapter 7. If the means test says the person is able to put as low as $100 to pay off the bills, then the person will be given the option of filing for a chapter 13 bankruptcy. In both scenarios, the borrowers must pay for and receive credit counseling and budget analysis. Even though Chapter 13 allows a bit of relief on a person?s monthly bills, it?s not as generous to consumers as Chapter 7 and has several disadvantages that make a lot of borrowers decide they don?t want to go with this method. The main negative of a Chapter 13 is that after the terms of the filing are set, the borrower?s finances may be ruled over by a trustee of the court. Most people don?t like to have an outsider involved with their finances all the time, so this makes getting a Chapter 13 very unsatisfactory and usually the borrower decides to try debt settlement instead.
Debt settlement or negotation is the new kid on the block as far as debt-handling options go. It offers many very drastic and bold advantages to entice debtors into using the service over other more traditional options. Debts bundled into a settlement often have a reduction of up to fifty percent in payment rates, which takes a huge amount of immediate pressure off of people struggling to pay back their loans. Many different kinds of debts can be rolled into a settlement, from medical and credit card to utility bills. Settlement processes can also reassure lenders that they'll be getting at least some of their money back, and informing them that you have a settlement underway will reassure them, discouraging aggressive legal measures against you.
Settlement will generally result in an overall debt reduction of fifty percent, but it can climb as high as almost three-fourths of your total debt in exceptional circumstances. Combined with the reduction in monthly payments, this results in less financial pressure, allowing you to pay things back and get back to zero more quickly for a fresh start. Most settlement payment processes will run for no longer than four years, but within that time period are reasonably flexible according to the needs of the debtor. This may seem like an extremely short amount of time for large loans such as mortgages, but the loan and payment reductions allow this kind of time limit to be practical.
Debt elimination programs can reduce outstanding balances by 40 to 70%, depending on the specific creditor. In general the average account included in a settlement will be reduced by 50%. The process provides added security for assets that represent a security interest. By reducing payments and eliminating a major portion of unsecured debt relieves pressure on secured assets. Debt settlement is often combined with mortgage loan modifications to help homeowners reduce their total payments toward debt and get for new mortgage terms. Most debt elimination programs terminate within 48 months, the same account with minimum payment could take over 20 years to payoff. The settlement of accounts allows for borrowers to begin the process of re-building their credit scores faster than bankruptcy which can remain on a consumer?s credit report for up to ten years.
This article has spent a fair amount of time praising debt settlement and pointing out the disadvantages of bankruptcy. But the truth is, there is no one right procedure that fits all people in all circumstances. You should analyze your situation either on your own or with the help of a financial expert, and then make a decision about what procedure is most likely to give you the best possible outcome. - 31377
About the Author:
Layla Vanderbilt is the webmaster for a leading website that offers for instant bad debt consolidation advice and guidance.
