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Debt Settlement vs. Bankruptcy
Sunday, January 20th, 2013

Whenever people think of breaking free from debt, the no.1 solution that they think of is to file for bankruptcy. Getting the court’s protection from the Collection Company or lender and having not to think of the minimum monthly payments you need to make every month sounds like a great idea. However, bankruptcy has bad “side-effects” for the individuals filing. Therefore, wouldn’t it be better to settle your debt?

Starting Debt Settlement

Before applying for bankruptcy, people can try debt settlement first. This is also known as debt negotiation, which is usually used to settle unsecured debt.

Debt negotiation or debt settlement is done by bargaining with the lender to lessen the debt amount. This is done so it is agreeable to both parties involved in the debt negotiation process. Usually, the debtor goes through a debt relief program that is offered by companies specializing in this area of work.

A good starting point

There are advantages to debt settlement over bankruptcy as seen below:

  • Lenders prefer this method – of course, lenders would rather choose debt negotiation than have the debtor file for bankruptcy. If bankruptcy is filed, there is a chance they may get nothing or a small amount of monies due from the court. Therefore, this allows negotiating with lenders for debt settlement.
  • Debtors won’t lose everything – the worst part of bankruptcy is that you, the debtor, has to give up all assets to pay off the debts. The money gained from liquidating properties owned, will be distributed to the lenders. When this happens, the individual and their family has to start from scratch.
  • Has lesser effect on your credit – not all lenders report debt settlement to the credit bureaus, unlike bankruptcy. Therefore, the debtor has a better chance to keep his credit clean.

Those that need help in debt settlement can consult Debt Rehab. They can seek advice whether this is the best solution for them. The company has a debt relief program that is convenient for those who need freedom from debt.

Do it Yourself Debt Settlement – The Top Seven Things You Need to Know
Friday, March 26th, 2010

Want to get rid of your debt but don’t want to file for bankruptcy or risk foreclosure? If so, debt settlement is an option worth considering. You might think you can’t settle your debt on your own, but the truth is you can do it yourself. There’s no law that says you have to hire a company to handle the debt settlement process. In fact, hiring an outside company usually means paying the company a hefty commission based on the total amount of your debt.

The key to successful debt settlement is negotiation and it’s a skill anyone can learn. Just follow these seven simple steps to do it yourself. Remember when you negotiate, you’re not only reducing the amount you pay individual credit card companies each month. You’re also lowering your total debt by 50 to 80 percent.

Once you start negotiating with creditors you’ll find that settlement amounts will vary. Some may offer as low as 30% and others up to 50%. Some will even forgive most of the amount you owe. Try it and in about six months you’ll be off to a fresh start.

Here are seven debt settlement and creditor negotiation steps you can do yourself:

1) First you need to accumulate a sizable amount of unmanageable debt, which you’ve probably already done since you’re thinking about settling.

2) Next you have to determine that debt settlement is your best option.

3) Once you make that determination, stop making your monthly payments.

4) Take the money you would have spent making those payments and put it into a savings account. Or if you can, try to get a loan with a low or zero percent interest rate from family or friends.


What is Forgiven Debt?
Monday, March 8th, 2010

After a debt settlement company has negotiated a reduced debt balance on behalf of their client, it is the client’s responsibility to report the amount of debt removed to the IRS.  According to IRS Publication Form 982, any amount of removed debt above $600.00 must be reported as taxable income.  This means that the creditor whom the debt was owed to has to provide the debtor with a 1099-C tax form which clearly states the amount of removed debt.