Debt Settlement Method
The Way It Is Carried Out
Over the past few years, the economy has brought in conditions where many people are finding it tough to repay their debts. Unemployment, loss of jobs, closing of establishments has become an everyday affair. There is great uncertainty in the markets across the globe and the responding to those companies are passing through the phases where their profits are shrinking.
People who had taken multiple loans in the anticipation that as they gain experience in their jobs they will get promotions and better salaries and will be able to comfortably repay their debts are finding it difficult to sustain in the current environment. They are looking for ways to get rid of their debts.
Debt settlement and debt consolidation are some of the ways in which people could get some relief from the debt. Let us understand the process of debt settlement better.
Under the debt settlement process, the creditors are told that the debtors are no longer in a condition to repay their debt fully. They are also convinced that in case the debtors are not given a chance by them they are going to file bankruptcy. Negotiations for the payment of a lesser amount, somewhere between 50% of the original dues is what is tried for.
If the creditor agrees to the same there is an agreement between the debtor and the creditor in relation to the payment. The debtor has to have sufficient funds to pay the creditor within a stipulated time frame as a part of the debt settlement procedure. The creditor writes off the rest of the dues of the debtor.
Creditors often look at the financials of the debtor before getting into a debt settlement talk. Also in cases where the debtor is already under default of the loan , the creditor agrees to talks, considering that they will have to go to the collection agencies and offer them the money to collect the dues from the debtor.
On the other hand debt consolidation is a process where an individual brings all their debts under the umbrella of one bigger loan. This loan is used to repay all the other loans. However, the debtor must hold a good to excellent credit and a stable job so as to get the debt consolidation loan.
Debt consolidation is beneficial in the sense that the loan carries a much lower interest when compared with the average interest of all the loans put together. This also lowers the monthly payment as the individual has to make only one payment and it also allows more savings per month.
Dealing with debts:
Debts are of different kinds. One of the debts which eats up into the finances of any individual is the credit card debt. If you have a large credit card debt along with other debts the situation becomes tough to handle. One cannot concentrate on paying several debts at a time and the interests and the penalties keep on adding to the debt amount. One of the straightforward solutions to the debt condition is bankruptcy. However, there are different facets of bankruptcy which make it difficult to adopt.
People under bankruptcy will be left without credit cards and have to do away with their assets. Bankruptcy reflects on their credit report for a period of 7-10 years and during this period they will not be eligible for any loans.
Different states in the US have different laws pertaining to the debt consolidation, settlement and bankruptcy procedures. Arizona debt settlement companies operate under the designated law. Arizona debt settlement companies even provide services related to debt consolidation and citizens of the state can consult them if they find it difficult to get rid of their debts.
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