Two Options To Reduce Debt



two options to reduce debt people who are in a financial crisis usually think of one thing to improve their situation reduce my debt now it is important to know that there are only two options to reduce the principal you owe not just the interest rate not only that you have to be in a real financial crisis to be able to qualify for any of these debt solutions one of these options is debt settlement this is the program that is most associated with the words debt reduction the whole idea is to convince the creditor that you cannot afford to pay the whole debt that you still owe this can be demonstrated by defaulting on your payments when you suffer a job loss go through a divorce or have extraordinary medical bills when the time is right you will send a settlement amount to your creditor and ask that anything the lump sum amount cannot cover will be forgiven you will negotiate with them to accept an amount that you can both live with you have the option to hire a debt settlement company to negotiate on your behalf whether you will work with a professional or not try not to agree to pay an amount that you cannot afford make sure that you will not send the payment until you have a written and signed document that proves the creditor will forgive anything that cannot be paid by your settlement fund this option can be quite frustrating and will involve patience on your part not all creditors will be agreeable at first it may be necessary for you to threaten them with bankruptcy in case they accept your bluff that’s okay if your intention is to reduce debt bankruptcy is the second option to make it happen in bankruptcy your petition can go two ways the choice will be determined by a means test one is a chapter 7 bankruptcy we’re in your personal assets that are not exempt will be liquidated and the money from that will be sent to your creditors anything that the liquidation cannot pay for will be discharged the other option is a chapter 13 or the repayment bankruptcy this is similar to debt settlement in the sense that you will be subjected to pay a portion of the debt this is done through a court-ordered repayment plan that you have to complete once this is fulfilled the rest of your debt will be discharged although both of these options will get you out of debt without requiring you to pay the whole debt amount it is not without consequences since there is debt reduction your credit score will be damaged in debt settlement the defaulting on your payments will be the culprit in bringing your score down in bankruptcy the discharging of debts will lower your credit score by an average of two hundred points make sure that you know all these consequences before you really decide to opt for debt reduction



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