Bankruptcy Filing or Using Debt Settlement for a New Year’s Resolution

Starting a new year for most people is a sign of renewal or a second chance. That’s probably why a bankruptcy attorney will get many phone calls from people interested in filing bankruptcy. This doesn’t mean people will act on it, but it shows their concern for their dire financial situation. This year, the economy is continuing its downward slide and this Christmas reiterated no signs of recovery from the retail numbers. The new jobs number just came in at 74,000, when the expectation was up around 250,000. Now only 62% of working age Americans are currently employed. This is the worst it’s been since 1978. This doesn’t sound like a recovery but a recession or even worse a depression. Banks are continuing to send out more credit cards to get Americans further into debt. When people should be looking for a solution, they are going further down the rabbit hole. Realistically, for many the only way out is to file bankruptcy.

2013 has come and gone and many people are beginning to work out the logistics of what their New Year’s resolution was. One good one would be to become debt free at whatever the cost. Many Americans want to avoid filing bankruptcy because they believe it will destroy their credit. The court is still out on that theory because it depends on how bad the situation is prior to the bankruptcy filing. When someone is buried in debt and can’t afford to make the minimum monthly payments, they are already in trouble with their creditors. This will lower their credit score extremely and a bankruptcy filing won’t do much more damage. For the ones that are afraid, there is always debt settlement. Debt settlement is a way to negotiate with creditors to reduce the balance of what is owed on the debt.

It is possible for an individual to settle their own debts if they are ambitious and have some patience. Most people opt out and use a debt settlement company to do the work. For debt settlement to work, a person will have to be in a position of not being able to afford their bills. The debt settlement company will call the creditors and negotiate a 50% reduction in debt owed. The only problem with this process is, if the individual has some cash sitting on the side that they are willing to use, they will have to stop making their payments on their credit accounts and send the money to the debt settlement company to build up an account of enough money to settle the debts. This is why there are many people against debt settlement. A person becomes at the mercy of the creditors and if the creditors decide to sue while this process is going on, they can. For people that decide to settle their debts, it probably would be better for them to contact the creditors directly themselves. Many times, creditors are willing to work something out if they foresee the possibility of a bankruptcy filing on the horizon. They know it’s better to get something than nothing from the debtor.

People need to understand that there are different processes to fit different needs. So whatever floats your boat, whether it be a bankruptcy filing for a debt settlement. The main thing is people need to do something when they are facing debt they cannot pay. Creditors have become very aggressive in this economy and don’t have a problem taking a debtor to the mat by suing them. The last thing someone needs is to be kicked while they are already down and out