Debt Relief Options - Why Bankruptcy Should Always Be The Last Option For Debt Relief

Online, July 14, 2010 (Newswire.com) - Unemployment rates have been skyrocketing, home foreclosures are at record numbers and consumer credit card debt is at an all time high. Unable to deal with all of these financial pressures, many consumers are finding themselves considering filing bankruptcy to eliminate credit card debt . Before considering bankruptcy as a solution credit card debt, take a look at a few other options: debt consolidation, credit counseling and debt settlement programs.

Debt Settlement

Debt settlement companies negotiate with creditors to reduce their clients' debts and help them pay back lump sum settlements significantly lower than the original amounts owed. Through debt settlement, individuals facing unmanageable debt will work with settlement professionals to pay back their creditors over time. By using debt consolidation, reducing an account's interest rate and/or negotiating the actual balance owed, the settlement company will help "work things out" between the debtor and creditor. The solution is ideal for consumers who want to avoid bankruptcy and for creditors who want to avoid lawsuits and get some money back.

Such programs work for qualifying individuals who want to pay off credit cards or other unsecured debts, including bills, student loans etc., and while they require commitment and can take time, are the best solution for consumers committed to paying back debt. Debt settlement may not work for debtors who are still able to make payments on time or don't have at least $10,000 in unsecured debt. Creditors are less likely to negotiate if they feel debtors can still afford minimum payments. Another advantage of working with a debt settlement company is that most companies also provide credit counseling as part of their programs.

Credit Counseling and Debt Management

Credit counseling is another popular option for consumers looking to get out of debt. Many services are inexpensive, and can help clients plan and manage their debt right away. For individuals looking to get back on track quickly, it could just be a matter of breaking bad spending patterns, consolidating loans or changing financial behaviors that are inefficient. Clients who utilize debt management and credit counseling services can have their interest rates reduced and start paying of debt right away in some cases.

The advantages of using credit counseling are that they are less of a commitment for consumers who are not deep enough in debt to have to resort to other options. Credit Counselors can help to get rid of fees or late charges, consolidate payments and help debtors save money through better financial planning. However, credit counseling does not offer significant relief for some and in more serious situations can just draw out the time it takes consumers to pay of their debt (putting them in a worse place than when they started). Also, if debtors use credit counseling firms funded by creditors, they are likely to pay more money than if they tried to negotiate a debt settlement .

Filing Bankruptcy

Bankruptcy should always be considered a last resort for securing debt relief, though it can also sometimes be the only solution especially when a creditor files a lawsuit or debt is too outstanding to settle. Through Chapter 7 bankruptcy, debt is completely wiped out, while with Chapter 13, debtors are still required to put their income toward debt repayment. After an individual files a bankruptcy claim, creditors can no longer foreclose on his or her home or garnish wages to collect payment.

Bankruptcy has the potential to offer debtors a clean slate, with one exception. A bankruptcy filing will remain on an individuals credit history for ten years, and can affect future employment and the ability to get credit to buy a car, house etc., even decades later. Though for some bankruptcy is the best option to rebuild finances, it should not be considered before other debt relief options because of the serious enduring effects on one's credit. All debt options take time and commitment. But the most important thing to keep in mind when getting out of debt is minimizing the impact on one's long-term credit as much as possible.

If consumers are struggling to meet the monthly payments then debt settlement or debt negotiation can be a legitimate option to avoid bankruptcy. There are also other debt relief options available which is why it would be prudent to speak with a debt relief specialist. Check out the following link for a free debt relief consultation:

Free Debt Relief Consultation