Debt Settlement 101

Debt is spiraling out of control after the recent economic meltdown in the US. In such situation, debt settlement programs or bankruptcy are some of the feasible debt relief options that people chose to get out of debt. It is advisable that before you select any one of the above-mentioned programs you should be aware of the advantages and disadvantages in order to select the right kind of plan that would suit your financial problem.

Calculate your total outstanding balance:

Try to take out a copy of your credit report from the credit reporting agencies in order to estimate your total outstanding balance. Review the credit report thoroughly and if you locate any discrepancies, then request the credit bureau to remove the erroneous entries. You should calculate that are due from your credit accounts, loans, both the secured and unsecured loans.

All these information would help you decide to make a choice between a debt settlement program and filing for bankruptcy.

Evaluate your financial situation:

You should maintain your financial information and try to include your monthly income and expenses in it. If you are contemplating filing bankruptcy then you are required to submit your average monthly income 6 months before declaring bankruptcy. You are required to calculate your monthly income whether you enroll in a debt settlement program or file bankruptcy.

Know if debt settlement is right for you:

1. Evaluate your financial situation in order to check whether you can pay off your debts with your current income. Remember that debt settlement will not be a faesible option for you if your expenses exceed your income. The settlement process will not help you get out of the debt trap. But if you have a stable monthly income and it is more than your expenditure then debt settlement can be an ideal solution to deal with your financial problem.

2. Try to estimate the total outstanding balance on your credit card and check if you can qualify to enroll in a debt settlement program. Make sure that you select the company in accordance with the total owed amount as the credit card balance requirement varies from company to company.

3. Look for a reliable and reputable debt settlement company with Better Business Burau accreditation. The companies that charge huge upfront fee should be avoided. Before you hire the services of a debt settlement company make sure that it charges reasonable fee.

Know if bankruptcy is right for you:

1. People who are financially crippled can file bankruptcy as it will help you deal with your financial catastrophe. But remember that filing bankruptcy can ruin your credit report for 7 to 10 years.

2. Check whether you can qualify for filing bankruptcy otherwise your bankruptcy petition can be disapproved. Therefore, you can hire the services of a skilled bankruptcy lawyer who will help you guide you through this bankruptcy process.

3. Check the chapters under which you can qualify for filing bankruptcy. Therefore, carefully read the rules and guidelines of each chapters.

So you need to decide after reading the above mentioned points which will be the right plan for your financial state to wipe out your debts.