[COLUMN] Bankruptcy or debt settlement?

Most people are unaware that credit card companies will negotiate with you if they believe that it is in their best interest to do so. Many times, you can negotiate a reduction of your interest rate, elimination of late charges and annual membership fees. If you are delinquent in payments, they may even agree to settle for less than the full amount of your debt. The fact that the account is already in collections, a lawsuit has been filed or even if a judgment has been obtained doesn’t even matter. If a debt collector tells you that it is “their policy not to settle debts”, don’t believe it.

For example, a recent study revealed that over half of credit cardholders who called and complained about their interest rates got an interest rate cut, resulting in as much as a 33% reduction. Now, why would the credit card companies do this? Well, you have to understand that the credit card companies are in a very competitive market. These companies know that it always costs more to obtain a new client than to keep a current one. Thus, if you have been paying on time, you are in a good bargaining position to re-negotiate the terms of your contract.

But what if you are behind in payments and can no longer pay the amount owed? This is where debt settlement may be a good idea especially if you are trying to avoid filing for bankruptcy. This doesn’t work in all situations but there are certainly a lot of scenarios where bankruptcy may be avoided, and debts can be settled using the least amount of money possible. It is a known fact in the collection business that as time goes on, the ability to collect on a debt diminishes. Thus, the longer your accounts have been in collections, the better your chance of settling your debts for a significantly reduced amount. For example, it is my experience that creditors will settle for about 30-60 cents on the dollar.

What debts can be negotiated? Actually, debt settlement is possible not only for credit cards, but for almost all types of debts. The list includes medical bills, bounced checks, personal loans, department store cards, auto repossession deficiencies, etc.

Debt settlement works best in situations where the debtor has the ability to produce enough cash to settle for 30-60% of the amount owed. The reason is that creditors are often only willing to settle for less than full amount only if you pay them in a lump sum as opposed to paying in installments. If you are a homeowner, you may be able to refinance and use your home equity for debt settlement. If you do not own a home, perhaps you can sell personal property that you don’t need, borrow cash from a relative or maybe take money out of your 401K plan. If, on the other hand, you don’t have a lot of cash available, do not lose hope. So long as you are employed or have some source of income, creditors may still agree to monthly payments over a period of time.

Filing bankruptcy may make more sense than debt settlement in certain situations especially where property is exempt and beyond the reach of the bankruptcy trustee and creditors. If you are eligible, Chapter 7 bankruptcy allows you to wipe out debts you can no longer afford to pay so that you can start fresh immediately. Chapter 13 allows you to consolidate debts into one affordable monthly payment, so you are not stressing out every month with not having enough income to pay living expenses and debts at the same time.

Debt settlement, Chapter 7 or Chapter 13- These are your usual options in dealing with debt problems. If you are currently in financial hot water and don’t know what to do, seek legal help and find out what is appropriate for your situation. For more information and to schedule a free consultation, please call Toll-Free 1-866-477-7772.

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NOTE: Due to pandemic safety concerns, I am offering free consultations BY PHONE to anyone who needs help in dealing with their debt problems.  

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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray J. Bulaon has successfully helped over 6,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE 1-866-477-7772.

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