Credit Card Debt Settlement Opposed To Bankruptcy In The United States – Which Is Best For You?
Are you wondering which is better – to work out a credit card debt settlement or to file for bankruptcy but are not at all sure which is the right one for you then you need to take a few things into consideration before you make any decision which is right for you at this time. Perhaps it feels the right thing to do is to file for bankruptcy and leave all the hassles of nasty phone calls and demanding letters well behind, but lets look at some facts here.
Let us presume you have been struggling for some time to meet your credit card bills – even the minimum payments are a bit of a struggle now. Your credit card company have thus sold on your debt to a collection agency. Usually within days of this happening the collection agency will be in touch (or endeavor to do so) with you both by telephone and by letter. Its not at all pleasant either! They want their money and they want it now!
However, if not in the first instance, at least some way down the line, they will reduce the amount they are asking for, and very often it will be a very significant reduction of what was once the original debt. If you go ahead and pay, the debt collection agency will get, lets say, around 60% of the final payment you make, leaving just 40% of that for the original creditor/s.
However, when it does get to this stage in the affair, the debt collection agency will actually offer to accept a fair amount less than your actual debt currently stands at. So as an example let us say that the collection agency will receive, if you decide to pay them, a commission of 60% of the reduced debt offer. Following so far?
Although the card company is not going to receive anything near the initial amount owed to them this $3,200 is still more than they would attain in Chapter 13 bankruptcy. If you were to go for Chapter 7 bankruptcy they would receive absolutely nothing!
Furthermore, if you were to take the bankruptcy option this would stay on your credit file for a total of 10 years. If you were to take the debt settlement option then it will remain on your file for 7 years in total before you can start afresh.
By taking the bankruptcy route you also have to pay other fees such as the following:
– filing fee
– attorney fees
– court fees
– pre-filing debtor education course fee (and you have to sit the exam too)
Furthermore, if you do go down the bankruptcy route, you have to find the filing fees, the attorney costs, the court costs and also the pre-filing debtor education course, which you then have to sit in for. Add to this, if you do not continue with the plan your case will be dismissed and you are back to the beginning again, which means all associated costs paid to go bankrupt are gone too.
Thus it appears that unless your debt has now become entirely unmanageable – and I mean entirely out of control – you should always strongly consider a debt settlement plan before contemplating bankruptcy.
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