Are you struggling with the choice between
bankruptcy or debt settlement? When many people find themselves in a tough financial
position, they instinctively want to avoid filing for bankruptcy at all
costs. Therefore, they seek out the advice of a nonprofit credit counseling
agency, which will help to create a debt management plan. Is this something
A debt settlement is an attempt to pay something less than what you originally
agreed. When you use a nonprofit credit counseling agency, they will attempt
to negotiate, on your behalf, a debt management plan with reduced or no
interest, stopping or eliminating late fees, and possibly paying less
than the total principal owed. During this time, you will make a single
payment to the nonprofit credit counseling agency, and they then distribute
the funds to creditors under the new terms. While it may feel like a debt
consolidation, it is not. However, debt consolidation is an option.
Before choosing a nonprofit credit counseling agency, there are some pitfalls
you must consider.
- Added Fees - A nonprofit credit counseling agency will often ask you to
stop making payments and have them make all contact and negotiations.
While this happens, interest and late fees will continue to accrue.
- Timeliness - A debt management plan can take 3 to 5 years, which can mean
36 to 60 months of additional fees and interest. Just because you are
using a credit counseling agency does not mean you are saving money.
- Credit Score - While on a debt management plan, there is a negative impact
on your credit, which eventually will include reporting the account as
settled for less. If it takes 5 years of payments, add another 7 years
on your credit report history. That is 12 total years compared to 10 years
for a bankruptcy.
- Creditors Can Refuse - A creditor is under no legal obligation to negotiate
a debt settlement. In fact, some have policies that they will refuse to
negotiate with any credit counseling agency.
What haven't we covered yet that is important to you? If you would
like to talk about choosing between bankruptcy or debt settlement, or
need more information, please