Bankruptcy Vs. Debt Settlement - How The New Laws Have Changed The Debt Relief Industry
Online, August 3, 2010 (Newswire.com) - There are more consumers deeply in debt than at any other point in history. Credit card balances have risen to ridiculous levels and are spiraling out of control. Consumers that cannot even meet their monthly minimum payments are left with two options: Bankruptcy or Debt Settlement?
A few years ago the logical choice for consumers massively in debt would have been to file a Chapter 7 bankruptcy. With Chapter 7 bankruptcy, consumers basically get a fresh start and are able to write off much of their unsecured debt. However with new bankruptcy laws recently passed, it is very difficult to get approved for Chapter 7 bankruptcy. The only type of bankruptcy most consumers can qualify for now is Chapter 13. This is far less advantageous for consumers and leaves a negative impact on their credit scores for at least 7 years.
The best alternative to filing bankruptcy is debt settlement. Debt Settlement allows consumers to negotiate a set amount to pay back to their creditors over time. The average debt settlement was negotiated for around 50% of the actual balance in 2009 and more than $1 billion was actually settled. Credit scores are still negatively affected but not as bad as a Chapter 13 bankruptcy. Most consumers are able to recover their credit from a debt settlement within 4 years.
On July 28, 2010 new laws regulating the debt settlement industry were passed by the FTC. These laws basically ban upfront fees and force debt relief companies to be performance based. This means consumers will not have to pay a dime until their debts are actually settled. These new laws make the debt settlement industry as a whole much more legitimate. It will push out all the shady companies and only the largest and most legitimate services will survive.
Considering the new laws regarding the debt relief industry , the debate Bankruptcy Vs. Debt Settlement has definitely swayed in the direction of debt settlement. There is far less risk for the consumer as they can be assured that if their debts don't settle they won't have to pay a dime.
The debt settlement negotiation industry will survive. Credit card companies and other creditors of unsecured debt are still willing to make deals. They are worried of the increasing amount of bankruptcy filings and would rather collect 50% of their money rather than nothing.
Consumers that are experiencing a legitimate financial hardship and have at least $10k in unsecured debt will qualify for most Legitimate Debt Settlement Programs . Not all programs are legitimate however which is why it would be wise to speak with a certified debt relief specialist who will go over all of your available options.
To speak with a debt relief specialist for a free consultation check out the following link:
