Why Debt Settlement Instead of Filing Bankruptcy?


You can't turn on the TV these days without hearing about someone filing bankruptcy or a commercial for debt settlement. Nowadays, it's no surprise to hear about a friend or family member that is filing bankruptcy. The United States economy is in the doldrums and it doesn't look like it's going to get better anytime soon. The White House recently reported how unemployment numbers had dropped 8%, only to follow up one month later with them rising again to 8.2%. Even though these numbers seem high, most experts say that they are not realistic. Many economic experts say that unemployment is closer to 11% nationally. What is not being reported is the people that their unemployment benefits have run out and they have stopped looking for work. This group is getting larger and larger and as time goes on, we will see many of these people filing bankruptcy to get the creditors off their backs.

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Let's face it, America is broke. The government is spending $1.3 trillion a year more than it has coming in and it seems to be trickling down to American consumers also. The average American has close to $16,000 in credit card debt and when you consider the average salary is only $36,000 a year, it's hard to believe this debt will ever be paid off. Most of these people continue paying the minimum payments and if they can stay current, they will ask for their balance to be raised continuously. It is just a matter of time before the wheels fall off of this kind of lifestyle.

With so many people in debt and so few working, the debt settlement and bankruptcy industry has been booming. Lately, it seems that creditors would rather see a debtor in debt settlement then filing bankruptcy. It's understandable that they would rather get something than nothing. It makes you wonder if some of these debt settlement companies are backed by the credit industry. Since debt settlement is unregulated, there have been many unscrupulous characters joining in to make a few bucks. The downside to using debt settlement instead of filing bankruptcy is the creditor is in control of the outcome. The creditor will dictate the payment schedule and what's required to be successful in the debt settlement and if the debtor does not comply, all bets are off.

This is why filing Chapter 7 bankruptcy is much better. An individual filing bankruptcy has the power of the bankruptcy court and the US legal system behind them. When a bankruptcy attorney files a bankruptcy petition, the automatic stay is put in place stopping creditors from all legal and collection activity against the debtor. The automatic stay is so powerful it will stop foreclosure, lawsuits, judgments and wage garnishments. The debtor will no longer have to worry about getting bombarded with calls from obnoxious debt collectors threatening them. This is one reason that pushes an individual over the edge to the point where they call a bankruptcy attorney to file. They want their life back. It is true that no one really wants to file for bankruptcy, but sometimes it might not be the only but the best option.


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