Bankruptcy and settling debt are not the same. Filing for bankruptcy is a decision made by a judge, which means that it must be done under the strictest of court rules. Once your case is being heard by a judge, you are not allowed to make any more filings, unless the judge approves a plan of action. Unless you are the absolute trustee of a bankruptcy case, and you have absolute power over the finances of your creditors, you cannot file for bankruptcy or even advise others to do so.
Debt settlement, on the other hand, can be done very easily without the need for a judge’s approval. Settling debt involves a process of negotiation and reducing the amount you actually owe, while paying as little as you possibly can to your creditors. You are able to do this with the help of an experienced debt consolidation company in Scottsdale.
There are two basic ways to settle debt. One involves continuing to pay what you owe, even if you are unable to pay. The other entails negotiating with your creditors to get them to eliminate annual fees, payment penalties and a lot of accumulated interest. These fees can add up, especially if you’ve been paying on credit cards for many years and haven’t paid a single cent in interest on the money. By negotiating these fees down to an affordable level, you are able to pay less every month towards your debt.
Of course, settling debt also has its disadvantages. While you are able to cut back on paying, you may be leaving yourself open to having your wages garnished or other collection efforts. While you may get rid of some of your debt when you file for bankruptcy, it can take years for you to get your credit back to an acceptable level before lenders begin offering you credit again. In the meantime, you may lose out on good employment opportunities or rental opportunities, making bankruptcy a much worse option than a better one.
Another disadvantage of settling debt is that often times the creditors won’t negotiate because they think you’ll just file for bankruptcy instead. While this can happen from time to time, the chances of this happening greatly decreases once you’ve made all your payments on time. After all, you have to prove that you really cannot afford to pay your bills, not that you’re just trying to skip out on paying. In order for creditors to give you the break you need, you have to prove that they would lose much more by renegotiating than they would gain by accepting your current terms. You can do this by simply paying more than what you owe each month, or by negotiating for better late fees and other financial hardships. This shows them that if you miss your monthly payments, you will still be in default of your obligation and they need to do something to help encourage you to make up the slack.
Finally, settling debt can negatively impact your credit scores for quite some time after your debt has been completely paid off. Most people who have to deal with credit card debt have suffered low credit scores because of it. However, it’s important to note that this is not the case for most people who have to use their credit cards. Remember that in the end, it’s not the credit cards that are at fault-it’s usually the late payments that get people into trouble. For more details on debt relief just visit your local debt relief in Scottsdale.