Elimination of debt has become a popular option amongst debtors.
A number of debtors feel it is a better option to settle debt rather than file for bankruptcy.
One of the main reasons behind this is the long term effect that bankruptcy has on the credit report.
Bankruptcy adopts the method of auctioning all the assets possessed by a debtor in order to generate as much funds in order to pay off debts.
After this all your debts will be eliminated and you will not be asked to pay any of the debts however your credit rating will take a major hit and it will take at least 10 years to get out of your report.
Debt settlement on the other hand provides a better solution to the debtor.
In this method a debtor and his creditor agree to settle the debt for a reduced amount of money.
This settlement amount will be considered as full payment.
This is a legal method of getting your debts reduced.
Any customer who has at least ten thousand dollars in unsecured debt is eligible for this program.
A customer will need to convince his creditors of his financial difficulties and if the creditor thinks that the customer is indeed at the verge of filing for bankruptcy then they make a deal.
This method of debt reduction is simple and can be done by the debtor himself.
However, many customers take help from a debt settlement company as they can provide an end to end comprehensive assistance.
Also they can negotiate a better deal for the customers.
A debtor will need to give a down payment of certain amount which will be considered as a settlement amount by the creditor.
Generally a good negotiation can get a reduction of up to 60 % of the total balance.