Consumers who find themselves deep in debt and unable to pay their bills need a solution to their debt problems. Daily, non-stop phone calls from collectors or pending lawsuits or judgments against you can create crippling stress levels. You could look to bankruptcy for relief, but debt management may be a better option.
Circumstances
Bankruptcy allows a debtor to discharge their debts under the supervision of the bankruptcy court, in exchange for the surrender of all non-exempt property for sale with a Chapter 7 bankruptcy, or submitting to a court ordered re-payment plan for up to five years with a Chapter 13. If you have property that you do not want to lose in a bankruptcy, or you find the repayment plan to be too restricting, then debt settlement may be a better option for you.
Debt Management
A debt management plan is a debt repayment strategy worked out using a credit counselor's assistance. The counselor helps you develop a budget determining how much money you have left over to pay creditors. The counselor can often negotiate reduced interest rates or payments with creditors, and facilitate civil communication between all of the parties, making the process go smoothly. Debt counselors can also provide you with training on how to manage your finances, providing more help over the long term.
Debt Settlement Companies
Many people deeply in debt turn to debt settlement companies as a solution to their financial troubles. You make payments to the debt settlement company, and it accumulates the money until there is enough to negotiate a settlement with a creditor. Then, they attempt to negotiate a lump sum settlement in full with the creditor. In the meantime, creditors will continue try to collect, and could even sue you before the settlement company gets around to paying them. Many debt settlement companies charge enormously high fees before they do anything for you. Unfortunately, many companies offering "easy" debt settlement are just scams.
Do It Yourself
You can arrange your own debt settlement without involving anyone else. Save up money to work a settlement. When you have enough saved to pay off half of the balance on one bill, call the creditor and offer a settlement. Depending on the type and age of the debt, you can start negotiating at about 20 percent of the balance. You will probably settle the debt for a 20 to 70 percent one-time immediate payment. This will only work with bills that are past due, but it can be an effective way to clean up older debts.
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