New Bankruptcy And Debt Settlement Laws - Understanding The Changes In The Debt Relief Industry
Both bankruptcy and debt settlement programs recently have had laws passed which regulate their practice. The new debt settlement laws in particular have given consumers a much more legitimate option for debt relief.
Online, October 6, 2010 (Newswire.com) - Debt settlement has been around for around 10 years however it has never gained so much popularity and controversy than it has the last couple years. The recent changes in the bankruptcy laws made it more difficult for debt ridden consumers to qualify for debt relief. When millions of consumers could no longer qualify for bankruptcy many of them decided to go the debt settlement route. This rapid growth in the debt settlement industry unfortunately led to several unethical companies entering the market taking advantage of debt ridden consumers. This however has all changed now that the Federal Trade Commission passed legislation regulating the debt relief industry.
Now consumers who enter into a debt settlement program won't have to pay a dime until their debts actually settle. Before this legislation, consumers had to pay large upfront fees with no guarantee of getting a successful settlement. As a result, many consumers paid thousands of dollars for nothing. This is not possible any more. Now debt settlement companies cannot collect fees until they reach a successful settlement with your creditors.
The most important aspect about this legislation is that the process of debt settlement or debt negotiation has become much more legitimate. The risk has been taken off the consumer and transferred the debt relief services. At the end of the day, legitimate debt settlement programs will be more effective because now the companies must work and perform for their fees. These new laws will increase the amount of successful settlements and provide consumers a more legitimate option for debt relief.
Only consumers that have at least $10k in unsecured debt and are experiencing a legitimate financial hardship will be able to qualify for a debt settlement program. Considering these new laws, the process itself is far less risky for the consumer and should be at least attempted before filing bankruptcy. Bankruptcy should always be the last option.
Getting a debt settlement will negatively affect a consumer's credit score for typically 2-4 years while bankruptcy takes at least 7 years on average. With debt settlement, the consumer will pay into a savings account instead of paying their creditors. When a balance builds up to around 50% of the balance, the debt settlement negotiator will attempt to settle the debt. Knowing that if the consumer were to file bankruptcy they would receive nothing, the creditor often will take 50% of their money back rather than take a complete loss.
Debt settlement cases are expected to increase with this new legislation. With more consumers on the brink of bankruptcy, creditors of unsecured debt are willing to negotiate. Filing bankruptcy is not beneficial for you or your creditors.
Debt settlement is not the only option for debt relief. There's also credit counseling and debt consolidation. It would be wise to speak with a debt relief specialist who can go over all your options and help decide what the best debt relief option is for your financial situation.
Check out the following link for a free consultation from a certified debt relief specialist:
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Tags: bankruptcy, credit card debt, debt relief, debt settlement, debt settlement programs, get out of debt
