Debt settlement may provide a better alternative to bankruptcy

06/21/2010

Many Americans saddled with an insurmountable amount of debt may initially consider filing for bankruptcy, but before doing so, they should consider debt settlement options.

Though debt settlement often requires an individual to enlist the help of a financial professional, attorney or consumer credit counseling service, it may allow them to negotiate a one-time payment to a creditor, who will then forgive the remainder of their debt. However, getting a lender to agree to settle the amount of the debt for lower than the full amount owed can be difficult.

Consumers may want to consider consulting with a tax attorney or credit counseling service for assistance with negotiations, paperwork and settlement fees, according to Clark Law Offices.

Though debt settlement may lower a consumer's credit score, consumers can slowly rebuild their credit by paying their bills on time and refraining from applying for additional lines of credit. Though it may take years to improve their credit score through debt settlement, a bankruptcy, in contrast, would remain on their credit report for no less than ten years.

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