What’s life after declaring bankrupt? Common feelings entail uncertainties, restlessness and fear. To overcome Chapter 7, 11, 12 & 13 Bankruptcies filed, you need to undergo the pain of doing credit repair, debt consolidation or debt settlement. These debtor’s solutions are explained in detailed. Flexibility helps to rebuild credit history and settlement of consolidated debts.
Choice: Debt settlement or Bankruptcy.
Settling unpaid debts vs. declaring bankrupt until repaid – several bankruptcy laws enforced not to harm your credit scores but to give an opportunity to freeze your scores. There are two options: Debt Settlement & Declared Bankruptcy.
Now, understand the importance of both aspects. A “blind” attempt may not work as the other option is available for creditors to sue you. Learn more about your selected choice:
Life as a Bankrupt: a bankrupted debtor cannot do what normal consumers do. He/she won’t have the liberty to take up consignments, apply for credit cards & loans, travel overseas for vacations and not even finding a job. Zero or 0 credit score given. Frozen credit reports. Almost always lack of opportunities for business. Affects future credit obligations.
Life after Settlements: a borrower under debt settlement plans resumed normal duties. He/she is free to take up consignments, apply for secured credit cards & loans, travel for vacations abroad and secure new job opportunities for advancement. Significant drop on credit scores. Unfreeze credit reports. Have the opportunity to start a business. Remains liable until fulfillment of settlement obligations.
Both choices seemed to be right. Yes, you can opt for a debt settlement only (if) you’ve the ability to afford monthly payment to a debt management plan. To qualify for a Debt Management Plan (DMP), you’ll need to undergo professional & legal credit counseling sessions with an accredited credit counselor. Credit counseling services helped in negotiating for debt settlements for debtors.
Alternatively, you may opt for debt consolidation plans. It is done by borrowing a sizable loan from debt relief companies, banks or any fund houses. The loan is used to repay remaining balances (such as credit card debt & mortgage). Refinancing is classified as debt settlement plans. A reputable company offers quality settlement plans at a premium to total debt. Weight out the pros and cons of using debt settlement loans vs. credit counseling plans.
Note: Always ask if paying off outstanding debts is better than declaring bankrupt to banks.
How do debt & credit card settlement affect my credit score?
Unpaid & Unsettled accounts – residue of debt remained in your credit reports for an indefinite period. No creditors would close accounts that has not been paid. Efforts to reclaim back outstanding amounts could be settlement of debt plans, repossessions, recollections and other legal actions. Never will provision of bad debts written off.
When lenders gave up on collections, sometimes written as charge offs entered into a credit report, your credit scores dropped by 10 points to 100 points. There had been cases on credit scores turning 0. It is possible to be penalized by Court judgements. Learn how to deal with debt & credit card settlements here:
Settlement of credit card debt: You propose a credit card debt settlement plan to creditors. Inversely, your lenders offer credit card debt consolidation loans. Both ways worked well. If not, you’ve to sign up for cc debt consolidation loans when creditors rejected your settlement offers. Always negotiate from the lowest possible claim. Gradually raise the debt repayments to 20%. Last offer is 35 percent settlement claims. Associated lenders normally demand for up to 50% cc payments. Give a range of 30-40% of cc loans. Never accept complete credit card debt payments.
Debt settlement makes sense for reduced interests and partial settlement of credit card debt. It does not make sense to erase your debt through Chapter 7 bankruptcy and restarting your credit file. Debt relief companies made profits from total consolidated debt for settlements.
Note: Choose wisely between Debt Settlement & Bankruptcy – Northgabankruptcy (2017).
Can I negotiate debt relief plans from a settlements company?
Debt Relief Ala Carte – a professional question about determining the best way is least damaging to your money & credit. Nobody wants to file for bankruptcy. Settling debt with creditors have to be reasonable. How do you negotiate for debt relief plans the right way?
A debt settlement company is paid to settle one or more debts. Generally, most problems derived from credit cards and loans. Observe what is good for debt settlement agencies:
Negotiation of settlement rates: Paid efforts usually range from 15% of total debt up to 35%. This amount excludes any credit card debt repayments back to creditors. Formula: Your total debt negotiated with creditors (in percentage) X rate agreed with debt settlement companies (in percentage) = percentage payable to settlements agencies. It’s unwise to commit more than 20% of total credit card debt only to compensate debt relief companies or banks.
Consolidation of loans is fair. If you decided to go for in-house bank’s credit card consolidation plans, always request for negotiation on repaid interests. It is not another profiting financial product for banks! Else opt to go for credit counseling services in order to complete a debt management plan.
Note: Once started, don’t think of Chapter 7 Bankruptcy or any way of declaring bankrupt!
Any credit advice on paid & settled accounts?
Paid & Settled accounts – a closed account inks “payment in full” for paid accounts where else closed accounts written as “settled” for partial settlement. Regardless of the descriptions, financial institutions closely monitored paid & settled accounts in credit reports.
When an account is repaid, amount of time naturally helps recover your scores. Take note of the following possible scenarios:
- Waiting for a 30 to 60 days period for an update: Be patient. Creditors report the information to major credit reporting agencies. The bureau takes approximately 30-60 days for updated information to be recorded. Call up any credit bureau if there’s no changes or late refresh on updated info.
- Reported information retained up to 10 years: Like it or not, bad & paid accounts are consolidated on credit reports, minor ones 3-4 years & major 7-10 years – most fall off after 10 years. File for disputes to credit bureaus if an item remains after 10 years.
Common questions raised: Inquiries from utilities on credit report, mistakenly reported as deceased and removing inquiries from loan applications. Do not forget to ask these questions when you’re learning on how to “fix” credit yourself. Hard inquires are not a good sign.
Note: Lenders are human too. They panicked when seeing you losing a job or lack money.
What if I settled collections & charge offs on time?
Promising on collections payment – an approved plan from debt collection agencies or banks in returning promising (partial) debt repayments under settlement programs. Many lenders & creditors associated with debt collection companies. The motive: Get back money.
When you promised to repay a debt, after several rounds of negotiating for settlement of loans & freeze interest rates, the company will monitor your payment history. The penalties of missing payments or late payments could be severe. A good borrower often completes paying off credit card debt or other forms of financing on time.
If not, collections department will not hesitate to transfer risk to debt collections companies or file a lawsuit against you on bad credit. Paying off bills on time is a discipline. It helps you in traversing across multiple loan applications in future. Failed payments cannot be tolerated.
Note: Settling of collections and charge offs doesn’t influence credit scores.
Good to know about settled: how debt settlement provides flexibility
Do not agree to any terms offered by creditors. It’s possible to request for financial assistance externally from agencies (such as debt relief companies, debt settlement companies, banks or credit counseling services). Many options of consolidation of debts are available. Be wise in choosing the best settlement plans.
Take your time. No one is forcing you into bankruptcy. No lenders can declare you as a bankrupt. Statutory law permits only debtors/borrowers can self-declared as bankrupts. It is possible for creditors to file for bankruptcy charges against you. Remember that, debt settlement is in resemblance to bankruptcy so don’t take things lightly. Every decision matters albeit the flexibility of normal daily routines.
People also ask:
What happens when someone sues me and I have no money?
Why am I needed to pay credit card lump sum settlement?
Why a Court Judgement is given to me?
Can I renegotiate against a Court judgement?
How will Judgements affect my life?
Please help me get out of bankruptcy filing!
Quote of the Day: “Practice awareness in Money – KIG Hall [2013-2018]”
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This article was originally published on April 05, 2014. It has since been updated.