Thursday, April 12, 2007

Legal Credit Card Debt Elimination

People struggling with debt often hear the phrase "debt elimination" and believe it is the solution to their hardships. Unfortunately, most debt elimination programs are thinly veiled scams aimed at relieving you of even more money. You can't "eliminate" your debts any more than you can travel back in time. However, you do have options that can result in your debts effectively being eliminated, or at least reduced.

Debt Elimination

    Debt elimination proponents often make claims stating you can "cancel" or "erase" your debts through one complicated and obscure legal method or another. These claims are aimed at people with debt problems and they always come with a catch, namely that you pay the advertiser for this secret information or for legal documents they sell you. There are no magic bullets out there, and you should view anyone offering to sell you secret information or legal tricks to magically eliminate your debt with a heavy dose of skepticism.

Debt Settlement

    When you agree to a loan, you and your creditors enter into a contractual obligation. Like any contract, you and the creditor can negotiate the terms. You can also renegotiate the terms after you've entered into the agreement. By renegotiating the terms of your debt, you and your creditors may agree to settle your debt, usually by allowing you to pay less than you owe. This debt settlement process is entirely legal and only depends on you and your creditor's willingness to renegotiate the terms of your agreement.

Bankruptcy

    Another entirely legal way to reduce or get out of having to repay some or all of your debts is to file for bankruptcy. When you file for bankruptcy protection, your creditors are not allowed to take action against you until the bankruptcy court allows them to do so. Individual bankruptcy, especially Chapter 7, often allows you to erase some of your outstanding debts, such as credit cards, medical debts and other unsecured debts, according to financial adviser and author Liz Pulliam Weston.

Effects

    While bankruptcy and debt settlement are two ways you can legally reduce or erase your debts, they are not without their downsides. Both debt settlement and bankruptcy will lower your credit score significantly, and will remain on your credit report for at least seven years. However, if you're faced with overwhelming debt obligations and have no other options, these options afford significant benefits and can serve to help you get back on your feet.

0 comments:

Post a Comment