Advantages of Debt Negotiation over Bankruptcy
There are various legal means offered under the US Bankruptcy Code which can help individuals and businesses rise up from overwhelming debts to once again enjoy financial stability. One of these legal means is bankruptcy, which the U.S. Congress approved in 1978.
Bankruptcy offers debtors so many benefits and advantages (based on the specific bankruptcy chapter applied for by the debtor), like:
– The automatic stay, a court injunction that orders creditors and collecting agencies to stop collecting debts or enforcing liens on debtors;
– Discharge of all unsecured debts, which includes debts due to credit card debts, medical bills, personal loans, among others; and,
– The restructuring of the debt payment scheme to make monthly payments more affordable to debtors.
In 2010 alone, there were more than 1.5 million cases of bankruptcy filed in the U.S., according to the U.S. Federal Bankruptcy Courts. Filed under the personal bankruptcy category was 1,593,081, while those files under the business bankruptcy category was 56,282. But though bankruptcy offers benefits and advantages, an experienced lawyer would not right away recommend it as the key solution to overwhelming debts as there are other possible ways which, some debtors may find more beneficial, such as Debt Negotiation.
Debt negotiation, otherwise called debt settlement or credit settlement, is one approach to settling debts through debt reduction. In this approach, both creditor and debtor agree on reducing the balance of a debt (sometimes to as much as half) and considering payment of such balance as settlement of the full amount of debt.
Interestingly, in the Ryan J. Ruehle Attorney at Law, LLC, website, it is said that debt negotiation may even prove to be more beneficial to debtors (than bankruptcy) due to the more manageable payment plan that it offers. This is because debt negotiation:
– Does not require any litigation process (which is necessary in a bankruptcy process);
– Can reduce the amount of a loan or loan balance to more than half its original amount;
– Offers debtors the option of paying the debt amount through a single or lump sum payment or through monthly payments that will be much more affordable to the debtor;
– Frees the debtor from the harassing tactics of debt collectors, from lawsuits and any legal action that could lead to the forced sale of his or her properties; and,
– Defers interest payments, lengthens the time span of loan payment and even allows loan payment consolidation.
To convince his or her creditor to agree on a debt negotiation process, however, a debtor will absolutely need great negotiation skills and extensive financial expertise, concerns where a highly-skilled negotiation lawyer may be able to provide the debtor the negotiating advantage that he or she needs.