Credit Card Debt Bankruptcy – How to Negotiate a Settlement Deal and Avoid Bankruptcy
There are a number of reasons why credit card debt bankruptcy should be avoided at all costs. Debt settlement denotes an attempt to reduce your debts. Credit counseling and debt consolidation are better alternatives to it, but depending upon your condition, negotiating a settlement deal might save you from foreclosure or bankruptcy. Filing for bankruptcy means a major blow to your credit options for the next seven to ten years.
Why should you opt for card debt settlement?
• Settlement, undesirable as it is, is still better for your credit ratings than Card Debt Bankruptcy.
• If you are already behind on your payments, debt settlement can assist in restoring your credit.
• Most settlement services will require you to stop using a credit card or take out loans during this period, so you learn to manage your money more carefully.
You can settle your debts on your own, but to ensure more profitable results, it is always advisable to hire a professional service. These settlement services are experts in saving you from card debt bankruptcy. They do the negotiation and handle all your related paper works for you. The company will review your debts to find out which all can probably be settled. Card debt settlement is pretty common, whereas mortgages and student loans cannot be negotiated in 9 out of 10 cases.
Once you have applied for settlement, the settlement company will assess your accounts and then approach your creditors for a settlement. Most settlements are for 30%-50% of the total balance. However there can be cases when it is as low as 20% or high up to 75%-80%. A good settlement service doesn’t guarantee any specific rate or suggest adding a “credit repair”.
Your debt condition determines how long it will take you to get a settlement. The time span may range from a few months to a few years. You may either be asked to pay small amounts within a time frame or lump sums to pay off the negotiated amounts.
However, please remember that debt settlement also affects your credit rating negatively. Besides, according to the IRS, if you get a settlement of more than $600, it is considered an income and can be taxable. Combine this with your settlement charges and you might end up spending a considerable amount. Lastly, there is no guarantee that your creditor can surely be persuaded to settle your debts. Thus, opt for debt settlement only when you do not have any means other than credit card debt bankruptcy left. If you are in a position to pay off your debts, try credit counseling or debt consolidation instead.
By: Sankalan Baidya
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