Credit Card Debt Bankruptcy - How New Bankruptcy Laws Led to Debt Settlement Loopholes

June 5, 2010 - PRLog -- There was a time when bankruptcy was the best way to overcome credit card debt because it was the most profitable option. The individual could cut his or her losses from unsecured debts and the lender would simply write it off as bad debts and secure tax breaks.

The new bankruptcy law has made life difficult for borrowers as well as lenders. The 2005 Amendment has made it difficult for an individual to go in for a chapter 11 bankruptcy as and when desired.

Further, the court has been given the authority of ordering for a chapter 13 bankruptcy instead of the option requested by the borrower. In such a scenario, there is a possibility that the lender may have to coordinate with the borrower and arrive at a mutually acceptable debt management and rescheduling option.

Debt settlement has become popular because it offers all the advantages of bankruptcy without the underlying cost and technicalities. Since the contract between the lender and the borrower determines the settlement agreement, there is no need for any external enforcement authority.

Further, the option of bankruptcy is always open and this is not prejudice simply because the party is tried a settlement on their own. This means that whether one succeeds settlement or not is not related or connected to the option of filing for bankruptcy.

Another significant factor that has encouraged people to go in for debt settlement instead of bankruptcy is the large number of bankruptcies in the economy. A certain number of bankruptcy filing has always been acceptable.

In fact, it is necessary for such bankruptcies to take place so that lenders and borrowers remain cautious. However, no economy, not even the American economy can withstand a million bankruptcies in a year. This means that a million families are filing for bankruptcy and hundreds of lenders are facing problems simultaneously.

All these complications can be avoided by arriving at a settlement agreement where debts are postponed for 12-18 months and a 50% to 60% discount is offered. As long as the money is being deposited in the escrow account, all the parties involved are perfectly satisfied in continuing the transaction.

It is very pertinent to ask what would have happened had the past amendments not been filed. In all probability, the number of bankruptcies would have been higher and the popularity of settlement would have been more. In such a scenario, you should consider this debt settlement option before you go in for bankruptcy.

If you are over $10,000 in unsecured debt it would be wise to contact a debt settlement company while conditions are so favorable. A legitimate debt settlement company will be able to eliminate 60% of your unsecured debt on average. There are now online services that will compare debt settlement companies for consumers and provide a top performing company in their area. To locate a top performing debt settlement company in your area check out the link below.Free Debt Advice
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