Why You Should Choose Debt Settlement Over Bankruptcy

There is no need for debt settlement if you are careful with your money and know how to manage your finances. But if you have been negligent and have been spending beyond your means you may have to negotiate your consumer debt.   
 
Ask any financial expert and you will be told that one should prepare a monthly budget and strive to live within one’s means. That’s all very good. It is a fact that each one of us knows very well. The problem, however, is that does that always happen? The sad reality of life is that a vast majority of the population is in debt and seeking to get out of debt one way or the other.

The question to be asked here is that why is the number of people in debt increasing despite the fact that we all know that we should be living within our means. Why is the number of bankruptcies increasing with every passing year?

This is not a treatise on the psychology of debt but if one has to get out of debt one must understand why household debts are mounting. The two most common factors involved in debt creation are:
-    Easy availability of debt.
-    The mad race for material possessions.

A distinction must be made between unsecured loans and secured loans. Consumer debt is unsecured. Home loans and auto loans are secured loans and in the event of a default the lender has the option of initiating legal proceedings to repossess the property or asset, which is collateral for the loan.

You never had it so good. Just take a look around you and you will find that you can get almost everything on credit. Every big ticket item, consumer goods, white goods, electronic gadgets are all available on easy installments. If the manufacturer does not offer it on easy monthly installments the store has an arrangement with finance companies. Besides these offers there is also the ‘old reliable’, your credit card.  

You name it and you have it. Even if you have a not so perfect credit history, you can still get whatever you want. It is just a matter of paying a bit higher interest rate. The fact that we all want the latest and the best and also more than the Jones next door doesn’t help either. There is a mad rush for whatever is new, be it the new gaming console or the latest fashion clothing.

The race for material possessions is not that big a problem as the easy availability of credit. Credit cards, initially meant to a substitute for carrying cash, have now become buy-now-pay-later tool. Pay a minimum amount and interest on the balance and you can have whatever you want within your credit limit. The irony is that if you are paying in time for so many months, your credit limit is automatically increased even if you do not apply for it. Easy credit promotes needless spending without any thought given to affordability.

Mindless spending is like digging up your own grave. Add to that the fact that there are bound to be periods of recession and you have a situation of unmanageable consumer debt. It is a problem that we create for ourselves and we alone have to find a solution for it.
 
The best part is that there is a solution for the mess we create for ourselves. If you are one of those hundreds and thousands of people in the country with an unmanageable debt situation you should first consider whether you can get out of debt without filing for bankruptcy. Regardless of the fact whether it is consumer debt or secured loans, nearly every type of debt can be renegotiated.

Debt renegotiation is different from debt consolidation. Debt consolidation focuses on clubbing together of various debts. Instead of paying multiple lenders you pay only one loan provider. It is actually a way of managing your finances in a better way. Debt settlement on the other hand is debt reduction, a direct negotiation with the lender for reducing the amount of debt.

Debt settlement or debt renegotiation, whatever name you call it by, is purely legal. The lender, which in most cases is a credit card company, settles for a lower amount. Efficient negotiation can provide debt relief up to 50% or more of the original debt or repayment at more equitable terms.

You have to look at it this way. The lender company is within its rights to initiate legal proceedings against you. You, on the other hand, can choose to file for bankruptcy. The fact is that neither option works the best for both. The lender company is interested in getting its money back or at least as much as it can get. Bankruptcy may be an option but it is a big blot on your credit history that can take years to obliterate.

However, it is not that easy as it sounds. Negotiation is a skill that not everyone possesses. Besides negotiations there is a lot of paperwork work involved. A debt settlement specialist on your side will not only work to reduce your debt but also reduce the stress involved in negotiating and paperwork. At the same time you have to be cautious of deceptive loan modification offers because there are a lot of scams in debt settlement also.
   
It is actually difficult to imagine life without credit cards. Nobody wants a debit card because it does not allow you a credit line. Debit cards allow a charge restricted to the amount you have in your bank and not beyond that.  

As I said in the beginning, there is no need to go in for debt settlement if you use your credit card responsibly and stick to budgeted expenses. However, as long as there are credit cards and credit lines, consumers will be tempted to bite more than they can chew and create debt situations from where it may be difficult to extricate themselves. Instead of facing the ignominy of bankruptcy it is much better to go in for debt settlement.