Debt settlement is a legitimate way to deal with debts, but many debtors find it hard to negotiate with creditors who do not always know if the debtor can pay the debt. Until October of 2010, there were many debt settlement companies negotiating debt for an upfront fee. The new laws prevent debt settlement companies from settling debt based on an upfront fees, and companies now must charge their fees based on performance. As a result, many debt settlement companies went out of business. If you need help managing your debts, there are several options such as debt settlement, debt management and debt consolidation.
What is debt management? The basic idea of debt management is learning how to handle a budget and living within your means. Theoretically, with good debt management techniques and the right amount of income, you should be able to pay all or a portion of your creditors within a given time. There are debt management companies who will offer to teach the discipline for a fee, and there are various public institutions who will train you for free.
The weakness of debt management is that the discipline is based on the theory you have the income to manage your current debts. The discipline does not always take into account your debts are already too large to manage.
Another option to debt settlement is consolidating you loans. When you have multiple creditors, you most likely will have multiple payments due at different times. Monthly debt payments can sometimes increase to more than your monthly income, which can create a debt problem. Consolidating your loans means taking a lump sum from one loan and paying all the other loans so that you only have one monthly payment. The monthly payment should be less than the multiple payments. By consolidating your loans, you may create a payment that is within your budget.
What is the downside of debt consolidation? You may not be able to get a consolidation loan if you are already overloaded with debts. If you are behind on debt payments and are needing debt settlement, most likely your credit scores have been lowered, making it harder for you to obtain a loan. Most lending institutions are not likely to issue consolidation loans unless you are willing to pay a very high interest rate, and a high interest rate loan can can make your financial situation worse.
The last option to debt settlement is bankruptcy. This options usually gets creditors to the negotiating table fast. Some bankruptcy lawyers will provide debt settlement services as part of their contract negotiations to file bankruptcy. They will try debt settlement first to the satisfaction of their client. If successful, the client usually saves the filing fees associated with bankruptcy and maybe a portion of the legal fee to file, so in this case, debt settlement can be cheaper than filing bankruptcy. If unsuccessful, the lawyer will file the bankruptcy on behalf of the client.
Debt settlement can be complicated. Bankruptcy lawyers may be able to outline your options. If you need relief from the stress of debt and you live in or around the metropolitan area of Toledo, Ohio, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney who will answer your bankruptcy questions.
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