If you find yourself in heavy debt and are considering bankruptcy, you should look into debt settlement. Debt settlement is where you contact your creditors and explain your situation. You make them an offer to settle your debt for a lower amount than what you actually owe. Why would a company be willing to take a smaller amount than what you owe them? They know that if you go into bankruptcy it is unlikely that they will see any money from you. If you owe $5000 with an additional $2000 in late fees, they may be very happy to get $3500 from you.
They have lost money, but $3,500 is much better than 0. When you do debt settlement it can still make a negative impact on your credit rating. After all anytime you don't pay money that you owe it doesn't look good. In some situations you may be able to negotiate pieces of the debt settlement that will keep your credit score looking good or at least not as bad as it would be if you went bankrupt. If you are in trouble and are looking at debt settlement, you have two options. First you can do the debt settlement yourself by contacting all of your creditors.
Second, you can hire a company to do it for you. If you want to do the debt settlement yourself, you should contact all of your creditors and be honest with them. Let them know you are in trouble and are doing everything possible to get them their money. Then you should probably follow up with a settlement offer letter.
Check with your library for examples of these letters. Basically you make them an offer saying that you will pay them X amount instead of the amount that was originally owed. If you are looking for a settlement company, watch out for people who are just trying to take advantage of you. There are even some debt consolidation companies that get you on a payment plan and then do debt settlement behind your back with your creditors.
So if you owe a total of $50,000, they will give you a loan for $50,000 and get you on a payment plan for the next 20 years. They will then contact your creditors and tell them that you can't pay and try to offer them $10,000 instead of the $50,000. This can really hurt your credit score--especially because you have to pay the full amount anyway. Debt settlement should be a last resort and you should view it as a way to get people some of the money you owe instead of losing it all in bankruptcy. You should make every effort to repay any loans that you have taken. You have given your word to repay them.
Debt settlement is a good option when there is no other way out.
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