Debt settlement as compared to Chapter 13 and bankruptcy
Debt Settlement Provider
The debt settlement option available through the creditor arbitration process is a much better alternative as compared to filing for bankruptcy under Chapter 13. In many ways, the Debt Settlement facility can be compared to Chapter 13, since a percentage of the debt is "paid" while the remaining balance is forgiven by the creditor. The unique difference is that debt settlement is generally a "private matter" and very much under the control of the "debtor", whereas filing for bankruptcy under Chapter 13 is a "formal" process and is guaranteed to appear on "public record". Chapter 13 is totally a legal issue and under the control of the courts and legal jurisdiction.
Specifications | Debt Consolidation | Debt Settlement |
| The average percentage of total debt to be "reduced" | 30% to 40% | 40% to 60% |
| Duration of the "option" | 3-5 years, with 5 years being the new "standard" limit. | 2-3 years, depending upon the monthly budget and other financial resources. |
| "Control" of the option | Legal in nature - the court has total control and power. | The consumer can decide and initiate. |
| Exposure | Legal and appears as a "public record" on your credit ratings. | "Private" in nature and the credit ratings can be "corrected" later on with a "debt repair program". |
| Duration of the negative impact to credit rating | The "bankruptcy" flag persists on your credit report for at least 10 years or more. Can affect your future jobs and loan applications during the "bankruptcy" period. | Negative marks remain on your credit report for a maximum of 7 years. Generally, majority of the consumers recover their credit-worthiness within 1-2 years after completing the "program". |
| Creditor lawsuits and litigations | Prevented after "filing" for bankruptcy. | Some creditors can take legal action to recover outstanding dues, but the "legal" issues can be normally avoided through negotiation process. |
| Flexibility or "latitude" | None available. The debtor has to pay a fixed monthly amount as determined by the court. | Highly flexible. The debtor's financial conditions determine the monthly dues. |
| Living expenses | Living expenses determined by the court in accordance to IRS schedules. | Living expenses usually not declared to the creditors except on "rare" occasions. |
| Professional assistance | From $1,200 up to $1,800 on an average, and normally paid up front. | From $3,000 to $5,000 on an average, but can be much higher for larger debts. |
It's clear from the above figures that Eliminating Debt is an attractive option, rather than utilizing Chapter 13. Opting for debt settlement has distinct advantages, and the same benefits can be availed by the debtor. This raises the next obvious question - If debt settlement is the "preferred" option, which is the best way, or method to avail it? The answer too is simple - either do it yourself, or have someone else do it for you. A "do it yourself" option is simple. You take the initiative and "manage" the issue totally on your own by collecting the necessary information, and execute the negotiation aspect with your creditor. This turns out to be the ideal situation if you have the necessary expertise and knowledge to deal with the issue.
There's another option available; have a Debt Negotiation do it for you. Debt settlement companies have the experience and infrastructure to deal with financial aspects. They have the legal counsel and debt experts or consultants at their "disposal", and they work as a team. They also possess the required experience to achieve efficient results. And, the main issue - time. They deal with debt issues on a daily basis since it's their "job" to do so. They don't spend "special" time while negotiating with creditors - it's daily routine. It makes sense to engage a debt settlement company to handle your debts and avail debt settlement facilities.
