New Bankruptcy Laws Make Debt Settlement A Legitimate Option For Many Debt Ridden Consumers
Online, May 11, 2010 (Newswire.com) - New bankruptcy laws have made it much more difficult for consumers to file bankruptcy and therefore many are being forced into debt settlement. If a consumer is legitimately experiencing a financial hardship and has over $10k in unsecured debt then debt settlement is often the only option. Thanks to new bankruptcy laws making the process much less appealing, the debt settlement industry has seen significant growth over the last 5 years. Due to the rapid growth of the debt settlement industry many believe it will outpace bankruptcy filings in the near future.
Debt Settlement is an aggressive debt relief tactic that requires consumers to stop paying their creditors and instead pay into a savings account until an agreeable settlement amount can be reached. The average settlement gets negotiated for approximately 50% of the balance. The consumer therefore gets to eliminate about 50% of their unsecured debts however they will receive a lower credit score as a result of not paying their creditors if full. Typically the effect on the consumers' credit score is less damaging than filing bankruptcy however it will be negatively impacted and any debt settlement company that says otherwise is not being truthful. Consumers who choose debt settlement ultimately make the decision that they would rather become debt free than maintain a high credit score.
Critics of debt settlement will argue that these companies collect large fees and only settle the debts 30% of the time. This 30% figure however is of all consumers who have entered a debt settlement program including the ones that dropped out early. Legitimate debt settlement programs only work if the consumer finishes the program or has enough funds saved up to reach an agreeable debt settlement deal. For consumers who actually stick with the program, typically 2-4 years, the success rate is believed to be much higher than 30%.
In 2009 alone the debt settlement industry was responsible for settling over $1 billion in unsecured debts. This resulted in nearly $600 million being eliminated for debt ridden consumers while collecting approximately $400 million to creditors that would have likely received nothing if the consumer had declared bankruptcy. So while the debt settlement industry has its fair share of unethical companies it is hard to argue that it does not serve a legitimate service for both the creditor and the debtor.
If a consumer has over $10k in unsecured debt and is falling behind on payments then debt settlement can be a legitimate option to avoid bankruptcy and eliminate debt. It is very important however that consumers know where to locate legitimate debt settlement companies if they want the best deal. The easiest way to do this is to utilize a Free Debt Relief Network that will qualify the debt settlement companies and ensure they are legitimate.
To locate well established and proven debt settlement services through a top debt relief network then check out the following link:
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