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Debt Settlement - A Way to Avoid Bankruptcy?
However, there are options that make avoiding bankruptcy a possibility. One of these options is debt settlement.
What Is Debt Settlement? Creditors will normally only take settlements from people who are in line for bankruptcy, as it is a guaranteed way to get their money back when the only other option is bankruptcy, which they will get nothing from. Since creditors often refuse to negotiate with consumers, a debt settlement agency may be your best bet. However, it's important to go with a reputable agency. Check the Better Business Bureau to make sure they are in good standing before deciding to allow them to help you with your debts. The entire process takes between 4 months to a year for the debt to be settled. While they are generally reserved for credit cards, you can also use debt settlement for some medical bills as well as certain types of loans, but not student or federal loans. There is some debate as to whether debt settlement adversely affects credit. It is definitely not as bad as bankruptcy, since it is not public record. Some look favorably upon it because it shows you are concerned with paying your bills. However, most professionals will agree that on a scale of 1-10, it puts a person at about a 6, where most people who would go in for a loan would need a 1 or 2 to qualify. So it does affect credit, but not as adversely as bankruptcy. Before You Settle
For some people, debt settlement is a viable and better option than bankruptcy. However, it's important to know everything debt settlement entails before signing on with a debt settlement firm.
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