Is the settlement of credit card debt as bankruptcy?

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Debt settlement, which is voluntary, is a negotiation process between debtors and creditors that takes place out of court, which differs from bankruptcy proceedings. Usually, a debt settlement company or organization acts as the debtor's intermediary by arranging a payment plan or settlement that the debtor's creditors consider to be acceptable. They have the experience and the expertise to accomplish what most debtors would find difficult, perhaps even impossible, to do if they were working alone.

Why debt consolidation works

Many people who are struggling financially only need a reduction in the overall total of their monthly payments to stabilize their finances and restore a sense of harmony in their lives. This is the goal of debt consolidation, and it can be used to meet a client's unsecured debt, including credit cards and medical bills. Many factors affect what a creditor will accepts as payment for an outstanding debt, this may vary from a minimum of $0.30 to a maximum of $0.60 on the dollar, and every case is unique. It is also important to note that taking this step can provide many debtors with a viable solution to an extremely stressful problem that seemed to have none.

Consulting a debt consolidation service is the means many people have used successfully to avoid having to go to court and file for bankruptcy, and the creditors are paid by that service until the debt is fulfilled. In addition, filing for bankruptcy may cost more than a thousand dollars, but this type of service is often free, or charges only a small fee.

What you should know about debt settlement

When a debt consolidator contacts a client's creditors, they come to an agreement and establish a structured payment plan in order to meet that client's financial obligations in a timely manner. In most cases, this is far more acceptable to the creditor than the possibility that the debtor may declare bankruptcy, or relying on a collection agency to resolve the matter. Also, while bankruptcy will affect a debtor's credit rating for at least seven years, the typical debt settlement program is usually in effect for five years, and when a client's debts are paid, his or her credit score will improve. Debtors make minimum payments, and if their circumstances change in the course of the five-year program (perhaps through an inheritance), they want to pay the debt sooner.