Depending on the details of the debt and the variables involved in one's specific financial situation, debt settlement, credit counseling or a combination of the two could the answer to successful debt relief. With the demands high health care costs, unforeseen expenses the impact of the economic downturn, consumers are desperate to avoid bankruptcy and manage competing financial stresses. As a result, many financial counselors say money mismanagement outranks job loss as the root of consumer debt. If living debt free is a matter of practicing good financial management, then credit counseling if the first step on that path.
Credit Counseling for Debt Management
After enrolling in a reputable credit-counseling program, a debtor will work with a certified counselor to review his or her income, assets, loans and expenses. The counselor will examine the debt owed and work with the creditors of the client to develop a plan for repayment. This plan may include lower monthly payments, interest rates and fees for the debtor, making the debt repayment more manageable and realistic. The creditors will then collect the owed debt according the agreed upon repayment schedule. The credit counseling organization will forward the client's payments to creditor(s), helping debtors shave years off of repayment.
Often, the creditors will agree to lower interest rates significantly for people in credit counseling. Rather than lose all chance of repayment when a debtor files bankruptcy, they prefer debtors enroll in credit counseling when debt becomes unmanageable. This ensures they get some money back from the debtor, instead of having the debt completely discharged with Chapter 7.
Debt Settlement
While credit counselors negotiate fees and interest on a debt, a debt settlement company is used to negotiate the debt itself. The company's representatives work on a client's behalf to negotiate a lump sum settlement, or reduced balance of the debt owed. Often they will convince creditors to accept 50-70 pe rcent of the total debt to be repaid. If the offer is accepted, the client will make payments to the settlement company within a set time period (usually around 14 days) until the firm's fee and agreed settlement deal is paid off.
Debt settlement is a legitimate bankruptcy alternative and makes sense for consumers on the verge of bankruptcy. Though it does show on a client's credit history, the consequences of bankruptcy are much more severe. And instead of ending up with next to nothing, debtors can cut their debts in half and still keep their homes, assets etc. Another benefit of using debt settlement is the fact that some companies provide free credit counseling before a client decides to enlist their help. So clients can actually get both services at the price of one.
Choosing a Repayment Strategy
Credit counseling programs are designed to help debtors rehabilitate a damaged credit history by making it easier for them to pay back debts. Counselors will h elp clients change bad financial behaviors and spending patterns that may be keeping them in debt, while reducing high interest that make repayment efforts stagnant. Debt settlement is a more serious debt relief solution, but for those facing debt of $10,000 or more, a legitimate alternative to bankruptcy. For consumers worried about committing to a debt settlement program or company, it might be a good idea to meet with a credit counselor first. It could just be that a debtor's financial planning efforts can be improved and debt can be reduced without having to pursue settlement. However, if bankruptcy is already an option, one can make an appointment with a reputable settlement company. There is also the possibility of choosing a debt settlement company that offers credit counseling as one of its services.
If you are struggling to meet your monthly payments then debt settlement or debt negotiation can be a legitimate option to avoid bankruptcy. There are also other debt relief options available which is why it would be prudent to speak with a debt relief specialist. Check out the following link for a free debt relief consultation:
Free Debt Advice [http://www.freedebtreductionhelp.com]
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