Bankruptcy Versus Debt Settlement: The Basics

Undoubtedly, it’s no easy task to unravel the credit card debt that has taken years, even decades, to accumulate. And clearly, a lot of work goes into contacting, managing, and negotiating with creditors for consumer debt. Since the Federal Trade Commission officially prohibited debt settlement companies from charging up-front fees on October 27, 2010, debt settlement companies cannot charge any initial or enrollment fees when hired to settle debts. not guaranteed from the consumer. However, many unscrupulous companies have forced state authorities to file a combined 259 cases to stop the deceptive and abusive practices of debt relief providers that have targeted consumers in financial distress. So now that a lot of the bad guys have been taken out, where do we go from here?

Let’s start with the basics

While there are exceptions to every rule, debt settlement, the process by which a consumer hires a company to settle their credit debt, generally works because it is financially beneficial for creditors to deal with third-party companies that have a relationship with the consumer. consumer and can Shepherd has reached an agreement with the creditor as long as the consumer remains in the debt relief program and continues to save cash. Creating an affordable monthly payment and enrolling the consumer in an FDIC-insured savings account are important functions of the debt settlement company. By segregating the settlement funds from the overall checking account, the consumer has a much better completion rate in the debt settlement program because many consumers spend everything in their checking account, making it very difficult to set aside the cash necessary to settle with your creditors. In addition, it is critical that the consumer can clearly afford the monthly payments based on a budget analysis, a difficult but certainly necessary requirement to make an informed decision on a complex issue. While it’s sometimes hard to deliver that kind of brutally harsh message, consumers need real answers to real problems.

Of course, the fact is that some consumers will be sued by the creditor, but generally speaking, creditors are receptive to having a third party settle on behalf of the consumer in the face of costly litigation and court costs.

Model attorneys, nonprofit agencies, credit counseling, debt consolidation, and more options exist for the consumer, and certainly consumers who may qualify for bankruptcy protection should consider all their options. However, at the end of the game, many consumers who over-leveraged during the housing bubble are now being forced to face a legitimate moment of truth; Does it make financial and emotional sense to “clear” your debts through bankruptcy or to use debt settlement programs to pay off your credit debt?

For consumers who meet the “means test” for bankruptcy, they should consider all of their options. We have all witnessed firsthand the dramatic financial reset that millions of Americans have been forced to adopt, and most should seek financial advice from trusted sources. Many Americans have desperately maintained their pre-credit credit scores, while many others have capitulated and thrown in the preverbal towel. For those who do not want to jeopardize their credit, debt settlement is clearly an unsuitable option, as debt settlement will clearly have an adverse effect on consumer credit, primarily because creditors must “wait their turn” to receive your settlement dollars, every time. the consumer does not make direct payments to their creditors. But for consumers who are already delinquent and have already low credit scores, debt settlement remains a viable option and a smart alternative to bankruptcy.

real alternatives

For those many consumers who have already lost their good credit or have made the decision that eliminating their credit debt outweighs the importance of maintaining a better credit score but want to remain bankruptcy free or do not qualify for bankruptcy relief , are good potential candidates for debt settlement. As an administrator, we use an online application for consumers who are comfortable with the Internet, an automated debt relief portal that guides the consumer in listing all of their income and expense information and customizing an affordable monthly payment using a debt calculator. Personalized Debt Settlement to enroll all of your unsecured debts in the program. The calculator allows the consumer to automatically customize the term and monthly payments based on the consumer’s actual financial situation. In addition, the online application provides the consumer with unique software technology that allows the consumer to open an FDIC-insured savings account to systematically save the cash required to pay off credit card debt over the term chosen by the consumer. Equally important in the process of choosing a debt settlement company is researching actual credit card debt settlements; all that really matters is that the consumer is truly debt free after the term. The consumer only pays a fee after the consumer’s credit card debts are paid off; This is a very compelling value proposition to the consumer as the company is highly incentivized to pay off credit debt as they only get paid based on performance. Ultimately, the online application fully guides the consumer with an easy-to-use, step-by-step software solution that guides the consumer through debt settlement in an organized and user-friendly manner.

Of course, not all consumers are comfortable using debt relief software. The problem is that other debt settlement firms may charge up to thirty percent (30%) when debts are settled. Our online program only charges a ten percent (10%) fee after the debts are settled. There are some “model lawyers” who do not follow the FTC’s legislation that prohibits advance charges, claiming that since they meet face-to-face with the consumer, they are exempt from the rules that prohibit advance charges. We also know of some programs that change an additional $80 dollars per month on top of a twenty-five percent (25%) fee when teeth are placed. The reality of the mechanics of negotiating with creditors on behalf of the consumer is that you don’t need a lawyer to settle credit card debt; an experienced negotiator will achieve successful debt settlements and, generally, while a business may use a lawyer by name to try to create additional credibility, the reality is that lawyers generally do not negotiate debt, negotiators do.