People in debt do not have too many options in hand.
They are usually so harassed by the collection efforts of the creditors that they are ready to get over with it at any cost.
There are many times people go ahead and file for bankruptcy because they cannot live with the pressure the creditors are creating at all points of time.
What are the actual options available with the customer in case of bad debt condition? 1.
Debt consolidation 2.
Debt Settlement 3.
Enrolling for a debt program 4.
Bankruptcy Debt consolidation, settlement and enrolling for a debt programs are taken up by customers to get out of debt.
In the early stage of debt problem the customer can come out of debt by just enrolling himself in a program to control his spending urges and look at budgeting.
Consolidation and settlement comes in when the customer is in neck deep in problem with debt.
He then requires professional help where the consultant negotiates with the creditors and gets a lower debt bill for the customer.
Debt programs affect the credit score of the customer.
The customer pays back a fixed installment for a fixed period at a negotiated interest rate.
This continuous payment rebuilds the customers credit history good enough to take credit from the market after the repayment period.
Bankruptcy on the other hand mars the credit file for a period of 7- 10 years or more.
Therefore it is better to make a trade off and settle debts and be happy with a 60% lower credit score rather than file for bankruptcy.