Debt relief options like settlement can be an effective solution to debt problems, particularly when it relates to credit cards. Settlement is best used after missing payments on your accounts.
(prHWY.com) February 16, 2012 - Wood Dale, IL -- Credit cards and other debts can easily get out of control as a result of high fees, high interest and financial troubles that make it impossible to keep up with monthly payments. When debts get out of hand, particularly when it is credit card debt, the idea of filing bankruptcy might come to mind. Though bankruptcy can eliminate debts and is an effective solution for some, it has a dramatic influence on credit ratings and many turn to it as a last resort.
Settlement Facts
Debt relief options like settlement can be an effective solution to debt problems, particularly when it relates to credit cards. Settlement is best used after missing payments on your accounts. At that point, the lender becomes worried that a payment will not be made and is often willing to negotiate an agreement with the borrower for less than the full balance.
The settlement is exactly as the name suggests: the borrower settles the account for an amount that is lower than the initial debt. Settlement requires paying a lump sum, which is usually saved up while working on the negotiation process. Depending on the lender, it might be possible to negotiate the settlement personally or it might be necessary to involve professionals.
After agreeing to a lower amount, the credit card holder pays the full amount agreed upon and the lender forgives the remaining amount on the debt.
Avoiding Bankruptcy
Since settlement is able to clear many debts for a dramatically lower amount, it is possible to completely avoid bankruptcy by eliminating the debts for an affordable price. Settlement works best on debts that are not secured with any property, such as credit cards or personal loans, rather than debts that use a home or vehicle as collateral. Since bankruptcy only clears the same debts, it is a potential solution to the problem before it becomes impossible to avoid bankruptcy.
Settlement is an effective solution to credit card debt because the lenders are often willing to negotiate with the borrowers. They prefer to avoid a write off caused by bankruptcy and are willing to reduce the prices for many individuals.
Bankruptcy is best used as a last resort when other options to manage debt have failed. When it is credit card debt that is creating a problem, turning to settlement as a solution can help. It is not necessary to take the drastic step of bankruptcy when other options can still eliminate the debts and result in less dramatic credit rating problems.
See Related:
Tips For Getting A Debt Settlement From Creditors
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