How to Clear Your Debt Properly

Sept. 28, 2011 - PRLog -- How does debt settlement "Clear Your Debt?"

Debt settlement, also known as debt arbitration, debt negotiation or credit settlement, is an approach to debt reduction in which the debtor and creditor agree on a reduced balance that will be regarded as payment in full.

Debt settlement is often confused with debt consolidation. In debt consolidation, the consumer makes monthly payments to the debt consolidator, who takes a small fee and passes the rest on to the creditors; this way, creditors continue to receive payments each month. In debt settlement, the consumer makes monthly payments, out of which the debt settlement company takes its fees; the remainder is put into a "trust" or "special purpose" account. The creditors get nothing until they decide to settle. Furthermore, the debt settlement company usually instructs the consumer not to make any payments to creditors. The intended effect is to scare creditors into settling the debt for less than the full amount. Typically, however, creditors simply begin collection procedures, which can include filing suit against the consumer in court. As long as consumers continue to make minimum monthly payments, creditors will not negotiate a reduced balance. However, when payments stop, balances continue to grow because of late fees and ongoing interest you'll find that your credit card companies and other collectors are substantially more motivated to clear your debt.

Consumers can arrange their own settlements by using advice found on web sites, hire a lawyer to act for them, or use debt settlement companies. In a New York Times article Cyndi Geerdes, an associate professor at the University of Illinois law school, states "Done correctly, (debt settlement) can absolutely help people".  http://bestsettlemydebt.com

With the new FTC rules in place that ban companies from pitching debt settlement over the phone a consumer can now also enjoy the pleasure of having to pay any upfront fees to get their debt settlement program going.  One expert advises consumers to look for companies that charge only after a settlement is made, and charge about 20 percent of the amount by which the outstanding balance is reduced.

The difference between bankruptcy and debt settlement is often thought about and from a consumers point of view they are stressed, emotional, angry, and frustrated.  There's no doubt that declaring bankruptcy or settling your debt may help stop the short term anguish, but you must consider the long term effects of the choice you make.  http://bankruptcyordebtsettlement.com

How to Clear Your Debt in 12 - 24 months is often the time frame that a consumer will continue to pay into their debt settlement program.  Should you owe $10,000 in unsecured debt, you'll likely settle your debt for $4,000.  This isn't bad considering that you got to buy everything you wanted at a really good discount.  The bad side is now the people that offer consumers credit are going to look past you for a few years.  Many have made the mistake, but when you clear your debt your life will pick back up again, so do whatever is necessary to avoid bankruptcy.   http://erase-your-debt-now.com

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