In the last five years, many Americans have been faced with financial difficulties and ponder whether or not to use the bankruptcy filing to deal with their debt. Although filing bankruptcy is the only option that uses the power of the United States legal system. While there many other options, none of them share the automatic stay. The automatic stay is so powerful predators cannot even contact the debtor once the bankruptcy petition is filed and they are notified. It even goes further than that, the automatic stay will stop foreclosure, lawsuits and wage garnishments. This is one of the things that make creditors shudder when they hear the word bankruptcy. The other reason is, they know once the individual gets a bankruptcy discharge, they will receive nothing from the debtor. There are other options that do have their benefits depending on the person’s situation.
First, for individuals that have smaller amounts of unsecured debt, they might want to consider attempting to negotiate with your creditors to reduce the interest on the amount owed. Sometimes dropping the interest from 20% down to 8% will allow the individual to pay a larger sum towards the principal and get the debt paid off. Also, they can even ask the creditor if they would be willing to reduce the amount of the balance owed by the individual as long as the person can pay them a lump sum to settle the debt. This is kind of similar to what debt settlement companies do. Some creditors are willing to talk if they know that someone is out searching for their options of how to eliminate this debt.
The second option would be to get a debt settlement company to do the negotiations for the individual. The only thing bad about this is they charge a fee sometimes as large as 20% of the amount of debt settled. So even though your debt is being reduced, they are adding more on their end to get paid. This industry is unregulated and people need to really be careful and make sure they get references before hiring one of these companies. The other downside to this is the company will usually ask the person to send the money that they normally would be paying on payments to build an account to settle the debt. This means that the creditors are no longer being paid. Some creditors have been known to sue these individuals before the debt is settled.
Lastly, filing Chapter 7 bankruptcy is king when it comes to eliminating unsecured debt. Compared to the other options, most believe it is harder on one’s credit. When considering the pros and cons of all of the options, nothing compares to a bankruptcy filing. Saddle that up with expertise of a bankruptcy attorney and a person will have a win-win combination. The bottom line is, it’s best to use the quickest and easiest way to eliminate the debt and get on the road to becoming debt-free.