Debt can be quite stubborn; it is not an easy thing to get out of. Once you are indebted, it becomes very difficult to steer clear of it. Non-payments and financial difficulty can lead to two possible solutions – debt settlement or bankruptcy. There is quite the difference between the two and we will discuss it today.
When your amount of debt is sky high, and you are no longer in the financial position to meet payments, you can ask your creditors to reduce the size of your debt or renegotiate other terms such as reducing the percentage of interest on the debt or increasing the payment period.
You have better chances of striking a deal if you let a debt settlement company to the talking. The bargain will cost you a sum of money. Normally, the debt that is not represented by any of your assets, also called unsecured debts, has a better chance of being re-negotiated. For example, credit card debt. It is one kind of debt that is easy to get tangled into. The application and review process of credit cards is fairly easy which makes thousands of dollars easily accessible to people who have no chance of returning it.
It is also called debt agreement. The debtor will pay to the middle person who struck the deal, and the creditor can, at no point in time, demand the remaining payments. The other scenario, if debt settlement is refused, is bankruptcy. If the debtor goes bankrupt, the creditor may get nothing. This is a better alternative to bankruptcy, in the interest if both, the debtor and the creditor. First, you apply for the debt agreement, and there are government debt agreements you can obtain for a small fee. Not everyone can qualify, there are certain criteria you need to meet.
You can also apply for a debt consolidation loan. Currently, you must be paying debts at different interest rates. With a consolidation loan, you can pay off all the creditors and then focus only on the singular loan. This, however, creates another risk. A settled credit card account means you can resume using it. It makes it easy for the debtor to fall back into his previous habit of swiping the card. This is bad credit debt consolidation loans and an infinite loop of debt.
This is basically the legal status of an individual or a company who cannot pay its debts and is insolvent. This is usually court ordered, and an individual can file for bankruptcy stating that he is no longer able to pay creditors. This usually affects your credit score negatively. Before you file for bankruptcy, it is important that you meet with bankruptcy consultants and assure that your assets, which do not represent any debt, will be secure.
Nobody can simply just apply for bankruptcy to dodge payments. The court will decide, based on your income, expenses and debt, if you can or cannot pay your debt. Generally, a bankruptcy will have a much more damaging impact on your credit score as compared to debt settlement, a consultant can review all your options available to you.
