You may wonder why a creditor would agree to a debt settlement; surely they want their money.  This is true, but not in every case.  Many creditors would rather accept a lower amount than spend the time sending you dozens of collection notices to get the full amount.  They would rather accept a debt settlement of 20-75% of the amount owed as a one-time payment and forget about the rest of the debt.   The creditor then reports on your credit report that the debt has been settled.  Most of the time a creditor will only accept a debt settlement if you are at least three months behind on payments.  No one can guarantee that a creditor will accept a debt settlement but it’s always worth a try.

Debt settlement companies are becoming more prevalent every day.  In the current weak economy, these debt settlement companies are looking to take advantage of the large number of Americans in debt.  The problem is when these companies know they can charge excessive amounts for debt settlement services.  These companies are supposed to help you negotiate with creditors.  Sometimes these companies cannot negotiate debt settlement with all your creditors yet still charge you fees every month.  Be careful and fully investigate any debt settlement company you work with.

Debt settlement is only a good option if you are looking at imminent bankruptcy.  It also isn’t the best option if you qualify for Chapter 7 bankruptcy.  With a chapter 7 bankruptcy most of your unsecured debts are written off so debt settlement is unnecessary.  And also if you qualify for chapter 7 you most likely don’t have the cash flow that debt settlement would require.  Under these circumstances another option, like debt management, may be better for you.

Some consumers decide to purposefully allow their account to get three to six months delinquent in order to negotiate a debt settlement.  If you are good with making your payments this would be a huge mistake.  Debt settlement in these circumstances would only ruin your credit rating and your reputation with your creditors.  However, if you have a legitimate financial hardship that is making it increasingly difficult to make payments on time, then this might be a good option and is a bankruptcy alternative.   Creditors will be more like to accept a debt settlement if you had at least been attempting to pay the debt back.    There are many other options when debt settlement may be right for you, the decision is yours to make.

Debt relief can be looked at in the broader spectrum and in this way it is a method of getting yourself out of murky financial waters and helping you reach a point where you can manage your debts adequately. Debt relief is relief that comes from getting out from under the burden of debts that is weighing you down.

Exploring the Options in Debt Relief

What forms can debt relief take? Debt relief can involve creating a budget that works for you; or it can be about communicating effectively with your creditors. Debt relief can also involve consolidating your debts. As a last resort, debt relief can involve making the decision to file for bankruptcy.

If you realize that debt relief is something that you need then there is more than one way to go about repairing the situation. If the money problems you are having are temporary then your best course of action for debt relief is to get in touch with your creditors and explain to them what is going on in your life. As long as your account is in good standing it is likely that an adequate payment arrangement will be able to be worked out. Some creditors might allow for the temporary suspension of monthly payment obligations until you are back on better financial footing.

The downside to this is that once you go back to making regular payments you are likely to be required to make larger payments than you did before. If this helps bring you debt relief then the higher monthly payments were probably worth it.

If you tend to be a spender and have a difficult time getting yourself into the groove of paying your bills on time, then debt relief for you might take the form of an appropriate budget. This might be something that you can do for yourself or else you might want to enlist the help of a person who is qualified in the area of money management.

Debt relief in this way involves taking a careful look at your monthly income and then setting aside the required amount for each bill. It is also important to set aside some money for savings and in case of an emergency. Whatever you have left over is for you to do with as you please. In other words, your fun money.

If you are in a great deal of debt then be aware that you have options. Seek out a form of debt relief that will be of the greatest benefit to you right away. Do not delay.

Being bankrupt will impact your credit rating but this does not mean that you are doomed in a financial sense. The bankruptcy will remain on your record for a period of anywhere from seven to 10 years. This is standard procedure.

One of the most promising things that many people do not know about being bankrupt is that practically from the day that you are discharged from bankruptcy your credit score is able to start looking better. That is something to smile about for sure!

Being bankrupt is no fun but it does not mean that you are a bad person nor does it mean that your financial picture will always look glum.

Make Contact with the Credit Bureau

One of the first things you should do after being bankrupt is to get in touch with the credit bureau and have them mail you a copy of your credit report. This will probably cost you a small fee. While there are three credit bureaus that operate in the United States- Equifax, Experion and Trans Union- you need only contact one as they all communicate information with each other. They have separate files on you but each is privy to the information that the other one has.

One thing you must learn from your experience of being bankrupt is to be as careful with your money as possible and to peruse everything with a fine tooth comb. Once you have the report in hand look it over as if you were holding a magnifying glass. If you find an error then report it to the credit bureau immediately so something can be done about it.

Start to Rebuild

In order to begin rebuilding your credit you need to have a credit starting point. If you were bankrupt then you are not likely to be issued an unsecured credit card so opt for a secured credit card instead. A secured credit card is comparable to a checking account. You establish the credit limit by using your own money and then you borrow and repay the money according to the limit. For example, after you have been bankrupt you might decide to establish a small limit of $500, $800 or $1000 or you might decide to start larger and have a limit of $1500, $2000 or $2500. Choose an amount that you can afford and are comfortable with.

In most cases, a Chapter 7 bankruptcy takes place within a period of three to six months. In this way it is not long and dragged out over months or years. The debtor comes out of the bankruptcy virtually free of debt. There are certain debts however that are not a part of the bankruptcy process and need to be paid. These include mortgages or rent payments, car payments, child support payments, student loans and money owed to the IRS.

While it is possible to lose assets such as property when you file for a Chapter 7 bankruptcy, this is the exception as opposed to the rule. A Chapter 7 bankruptcy allows the debtor to keep most of everything he owns. The less a person has the better off it is for them when it comes to a Chapter 7 bankruptcy. One of the exceptions to this is if you use property of yours as collateral for any loans you have outstanding.

Before more is said about the Chapter 7 bankruptcy it is important to note that not everyone qualifies for a Chapter 7 bankruptcy. Chapter 7 bankruptcies are best for those with few assets and modest to low incomes.

If the court deems that your income is high enough to warrant paying all or a portion of your debts then you may have to forego the Chapter 7 bankruptcy and instead file for a Chapter 13 bankruptcy. The court will subtract the amount of money that you need to spend on living expenses and other bills (such as a mortgage, car loan, child support, income tax, utilities, etc.) from the money you earn and determine whether you make too much to qualify for a Chapter 7 bankruptcy.

The number one reason that a Chapter 7 bankruptcy is most preferable is that debts do not have to be repaid, in full or in part. On the other hand, in a Chapter 13 bankruptcy involves a three to five year plan of repayment. The debtor will not be discharged until the debts have all been paid. In some cases if the individual has sufficient income, the debt must be paid in full. In other cases the arrangement may be worked out that only a portion of the debt need to be repaid.

These statements are all true, to a point. Read on to learn more.

Two Types of Bankruptcy

There are two types of bankruptcies in the United States. There is the Chapter 7 bankruptcy and the Chapter 13 bankruptcy. The circumstances described above characterize a Chapter 7 bankruptcy for any given person. The U.S. Bankruptcy Code also includes provisions for a Chapter 13 bankruptcy for an individual as well as bankruptcies that are geared towards businesses.

Before deciding to file for bankruptcy you should consider your alternatives. These include:

· Finding ways to earn more money and/or spend less to pay off debts
· Applying for a debt consolidation loan
· Obtaining a debt management plan by way of credit counselling

The Difference between a Chapter 7 and Chapter 13 Bankruptcy

When you file for a Chapter 7 bankruptcy practically all of your assets need to be sold in order for your debts to be repaid. On the other hand, a Chapter 13 bankruptcy is often referred to as an “Adjustment of Debts.” What this means is that a repayment arrangement is set over an extended period of time. What these two types of bankruptcies have in common is the ending- both come to a close with a bankruptcy discharge. At this point the debts are gone and the person must start on the road to financial recovery.

When a Chapter 7 bankruptcy is filed, the debtor must surrender all of his property to an attorney that has been assigned to the case. It is the attorney’s job to take the property and convert it into cash value in order to pay money to the creditors. There is sometimes property that is exempt from this procedure. These items are called “exempt assets.”

A Chapter 13 bankruptcy is geared towards those who want to pay back their creditors in full but need a more substantial period of time to do so. In this case the debtor is not expected to sell any of his assets. When it comes to this kind of bankruptcy, bi-weekly or monthly payments are made to the creditors. The amount of the payments is determined by how much the debtor can afford to pay after all necessary living expenses have been accounted for.

Be aware that a Chapter 7 bankruptcy is the best option for bankruptcy for an individual who has little if any assets and a modest income. When there are no assets involved, filing is a very basic procedure. However if a person is making an above average income and is able to repay a portion (if not all) of his debts, then he may have to file for Chapter 13 bankruptcy instead. In this case, a Wage Earner Repayment Plan will be put into play.

There are two main options to be considered when filing bankruptcy and offered by the U.S. Bankruptcy Code for people in financial crises. For some, filing Chapter 7 bankruptcy provides and opportunity to discharge unsecured debts and helps people get started on the road to financial stability. Many others opt for filing Chapter 13 bankruptcy that allows the repayment of secured debts like their mortgage debt over time.

Understand that filing bankruptcy is just one of many options for recovering from financial hardships. Educate yourself about your options for filing bankruptcy and then take action as soon as possible. You will find resources and pages of bankruptcy information that you can use as a source for learning more about the U.S. Bankruptcy Code and your legal options.

Bankruptcy is certainly an option, however there are bankruptcy alternatives available.
Recent advertising and media coverage of bankruptcy, debt relief and debt consolidation consider these alternatives as one. Nothing could be further from the truth. Bankruptcy should be considered only as a last resort. Bankruptcy has very long lasting implications. Most states carry bankruptcy reports for 10 years.  Bankruptcy laws are ever changing and walking away with a clean slate to start with is not nearly as easy as it once was.

Before any decision is made about your financial future all option need and should be explored. Bankruptcy may turn out to be your best option, but everyone’s situation is as unique as they are, so due diligence is in order.