A Better Alternative to Bankruptcy: Debt Reduction through Negotiation and Settlement

Bankruptcy is one of the top ten major stressors in life. Those who have gone through this devastating process can attest to the truth in that. Not only is bankruptcy a major financial stressor, it causes a great deal of emotional upheaval as well. We tend to measure our worth according to our financial situation, and for many going through bankruptcy, feelings of self-doubt, shame, embarrassment, and sadness are common. But the good news is that there is an alterative to bankruptcy that will allow those in debt to find relief from their burdens. Debt reduction strategies can help you resolve your obligations in an ethical way.

There are various types of services for those with problems like this. Perhaps the most common is the debt consolidation loan. This is simply a large loan, hopefully with low interest rates, that is supposed to pay off credit cards and other forms of unsecured loans. The debtor then has one monthly payment. This may be a good option for many, but a common issue is that once credit cards are paid off, they are not canceled. Suddenly, you have a lot more credit. You put a charge on, then another. Soon, you have that balance, and a consolidation loan, with which to contend. Many people end up with additional bills. To make this work, you have to be committed to maintaining your budget and keeping spending habits in check.

This is also true of debt reduction and settlement. This is different from consolidation (which just reorganizes your bills) in that the balances are reduced. For instance, if you have a credit card debt of $10,000, it may be reduced to $4,000, or perhaps even less. This dramatically lowers your overall debt and makes it easier to handle. You then pay the amount in full with the help of a debt settlement firm, and move on to the next bill. In this way, you systematically reduce your debt until it is paid.

How can a company reduce a $30,000 credit card balance to $15,000? This is where negotiation comes in. Debt resolution experts negotiate on your behalf with creditors, such as credit card companies. Creditors want their money. It is that simple. They want to recoup their loss, and if they cannot get the whole amount, they will most often settle for much less. Trained negotiators know how to reduce your overall balance, and because they have the weight of reputable companies behind them, it can be easier to use a service than to tackle the credit card companies and other creditors on your own.

This is more favorable than bankruptcy for several reasons. While both options do affect your credit score, debt settlement affects it less than bankruptcy, and many people who use reputable companies see their credit score rise in the long-term. With bankruptcy, it can be difficult, especially now, to get a mortgage or other new lines of credit. You may have to liquidate assets as well. Another major advantage to debt settlement or negotiation is that it shows creditors that you are willing to pay your debts and own up to your responsibilities. This makes it more likely that they will extend credit to you in the future.

Bankruptcy is the last resort, and one which should be undertaken only when all other methods fail. Before you get to that point, however, debt settlement can be the solution to your financial problems. By paying off your debt and adopting healthy spending habits, you can build a strong financial foundation for your future. To learn more about how to pay off debt, click here.