New Bankruptcy Laws - How New Bankruptcy Laws Make Other Debt Relief Options More Attractive
Online, July 20, 2010 (Newswire.com) - There are more Americans currently in debt than ever before. Just five years ago, consumers who were massively in debt would have filed bankruptcy however new bankruptcy laws have made filing bankruptcy an absolute last resort. Not only do the new laws make filing bankruptcy more difficult, but they also increase the negative consequences on the debtors credit score. With bankruptcy becoming more difficult to qualify for, other debt relief options have emerged.
Credit Counseling
Credit counseling is one option for debt relief. Credit counseling basically allows consumers to negotiate the interest rates on their credit card debts and come up with a payment plan to lower the rate and pay back the balance over a period of 4-9 years. This can be a good option for consumers that can comfortably meet their current monthly minimum payments.
If however, they experience a financial hardship and miss a few payments to the credit counseling program they can be kicked out. Credit counseling programs are notorious for being strict about missed payments and often kick people out after just a couple missed payments leaving them in worse financial shape. So credit counseling can be a good program for debt relief as long as the consumer is confident they can meet all the payments.
Debt Consolidation
Debt consolidation can make financial sense for consumers that have multiple debts and want to combine them into one single payment. Usually people take high interest debts and trade it for a low interest loan. Also, the majority of the time consumers will need to back up the new loan with an asset such as a mortgage or other security.
Debt Negotiation
Debt Negotiation is intended for consumers that have at least $10k in unsecured debt and are experiencing a legitimate financial hardship. Consumers will typically stop making payments to their creditors and instead pay into a savings account until enough finds are built up to start negotiating. The typical debt settlement in 2009 was negotiated for 50% of the original balance although results vary case by case.
Debt Negotiation Programs have recently become very popular amongst the debt ridden American consumer. Credit card companies and other creditors of unsecured debt are very exposed to incur significant losses from delinquent accounts. Due to the recession and high unemployment rate, many consumers are simply unable to pay back even their minimum monthly payments. When a consumer is on the verge of bankruptcy and their account is delinquent, creditors have no choice but to agree to a debt settlement deal.
Debt Settlement is an aggressive debt relief tactic and does not make sense for everyone in debt. Consumers must be experiencing a legitimate financial hardship and have at least $10,000 to qualify for most debt negotiation programs. There are also other legitimate options available so it would be wise to speak with a debt relief professional.
To talk with a debt relief counselor for free debt help check out the following link:
