Credit Card Debt Settlement Opposed To Bankruptcy In The United States – Which Is Best For You?
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Are you wondering which is better – to work out a credit card debt settlement or to file for bankruptcy but are not at all sure which is the right one for you then you need to take a few things into consideration before you make any decision which is right for you at this time. Perhaps it feels the right thing to do is to file for bankruptcy and leave all the hassles of nasty phone calls and demanding letters well behind, but lets look at some facts here.
Let us presume you have been struggling for some time to meet your credit card bills – even the minimum payments are a bit of a struggle now. Your credit card company have thus sold on your debt to a collection agency. Usually within days of this happening the collection agency will be in touch (or endeavor to do so) with you both by telephone and by letter. Its not at all pleasant either! They want their money and they want it now!
Yes that’s a fact, they want their money and they want it now, but what you will tend to find is that the amount they want is a much-reduced amount to the actual balance of the debt. You may not find that initially this is the case however, but in time they will try to negotiate with you upon the payment. If you do go ahead and pay them then the debt collection agency will receive – lets say around 60% of this amount as a commission, and the lending company will then receive the final 40% – a much reduced amount to what is actually owed to them.
You must be asking why the original creditor would be willing to accept such a small amount compared to what is owed, but before I answer that, lets have a quick look at some figures just to make all this clear.
- Lets imagine you owe $20,000 to your credit card debts.
- The debt collection agency is asking for a full payment of only $10,000 from you to fully settle the debt.
- The collection agency thus gets 60% of this = $6,000.
- The original creditor receives the remaining 40% = $4,000.
So at the end the card company will receive a total of $3,200, which although not nearly as much as you actually owe to them, is a more than they would receive in the case of a Chapter 13 bankruptcy. In a Chapter 7 though, they would not receive a cent!
So you can in time end up paying far less than you would do otherwise via debt settlement. Anything else to think about? Yes, actually. If you are to take on bankruptcy this will remain on your credit file for a total of 10 years, affecting your credit for that period of time. If you were to take on debt settlement your file would be “tainted” for 7 years only.
Further, if you are to discontinue with the plan at any stage your case will be dismissed and you will be right back at the beginning once again, having paid all those added fees, which you lose anyhow.
Thus, unless your debts are totally insurmountable, its a wise choice to go for the debt settlement plan, don’t you now agree?
Click the link if you need information about a debt consolidation program. You can learn about low interest and 0% interest credit cards too.
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