If you are engulfed in massive debt, paying your bills is becoming more difficult and you want to stop annoying and intruding collection calls, debt settlement may be a viable options for you. Also know as debt negotiation, debt settlement is a process by which your outstanding debt is settled for 40%-60% of the amount owed. By agreeing to this settled amount, the creditor is forgiving the remaining debt, thereby helping the client get out of debt faster.

• The 4 Basic Steps in Debt Settlement...
• Client stops payment to creditors, and starts contributing to trust account.
• Collection calls are handled by the debt settlement representatives.
• Negotiation of debt happens a few months after program begins.
• Debt is lowered by 40%-60% in a overall shorter time period.

Brief History on Debt Settlement:
Lenders have been practicing debt settlement concepts for hundreds of years. Creditors are usually willing to settle because it means that they will receive some amount of money owed as opposed to nothing or very little if the client files for bankruptcy. Debt settlement became prominent in America when bank deregulation during the late 80s made lending to consumers easier. This deregulation was followed by a recession which created financial hardships for consumers. As individual consumer debts increased, banks established debt settlement departments to negotiate with defaulted cardholders.

Changes to Bankruptcy Laws:
Not only have personal debt loads risen but another under reported change in 2005 has driven the demand for debt settlement. Legislation now has made it more difficult for Americans to claim Chapter 7 bankruptcy. Currently anyone filing for bankruptcy will be required to meet IRS regulations or will be forced into Chapter 13 which is a debt restructuring plan.

Many consumers that have considered bankruptcy have chosen to utilize debt settlement once they learned what a tremendous tool it can be for debt relief. Bankruptcy is never the only option. We consider not only the qualifications of the client, but also the client objectives when determining which debt relief strategy is the most appropriate. If the client does not qualify for debt settlement as determined by our attorneys, one of our highly qualified bankruptcy lawyers will be able to assist the client.

• Filing for bankruptcy usually requires the following...
• Undergoing a "means" test.
• Receiving debt counseling from an approved organization.
• Submitting a repayment plan.
• Attending a meeting with creditors.

There are two different types of bankruptcy. Chapter 7 allows a consumer to discharge most debts without having to repay them. In order to qualify for Chapter 7 bankruptcy a client cannot earn more than the average income for their state of residence. Additionally, in order to qualify a client must be unable to pay more than $100 per month to creditors after all reasonable expenses are accounted for. If a client does not meet these and other requirements they will be forced to file Chapter 13 bankruptcy which takes longer and requires the debtor to pay back a portion of debts owed. Filing for bankruptcy will stop all collection activity but there are important consequences to remember with either form of bankruptcy.

• Debtors can leave bankruptcy with heavy court and attorney fees.
• Assets including homes, businesses, autos, etc. may be taken as payment.
• Exploitation is required in front of a judge and creditors.
• Bankruptcy remains on the consumers credit report for up to 10 years.

Whether your situation dictates debt settlement or bankruptcy we can help along the way. Complete our debt analysis form and we will help advise which path is best suited for you.

If minimum payments are made on credit cards with ridiculous interest rates it may take 30+ years to get out of debt. In some cases it would take an average of 6 years for every $3,000 of debt. This is definitely the method that credit card companies prefer you choose. Unless you plan on making larger payments on your debt or you plan on coming upon a large sum of money, the lack of debt relief strategy will not only take a toll on you financially but emotionally and physically as well.

Even if you choose to do nothing the creditors will not take the same approach, the harassing phone calls and repossessions will continue, along with other headaches.

The chart below shows the length of time as well as the total amount paid if the consumer continues to pay the monthly minimum. These assumptions are based on a 19% interest rate and a monthly minimum of 2.1%. (Most credit card minimums are between 2.0% and 2.5%)