Bankruptcy Vs. Debt Settlement Programs – How New Laws Effect Personal Debt Relief Options

If a consumer or small business is struggling to pay back their unsecured debt balances they really only have two options: Bankruptcy or Debt Settlement. Bankruptcy used to be considered the easy way out for consumers experiencing a financial hardship however new laws have made Ch. 7 bankruptcy much more difficult to qualify for. As a result other debt relief options have come about one of which is debt settlement.

Before July 28th 2010 most financial experts would discourage consumers from entering a debt settlement program unless it was their only option. However, on July 28th 2010 new laws were passed by the FTC which made debt settlement programs a much better deal for consumers. These laws banned debt settlement programs from collecting upfront fees and made the entire industry performance based. This means debt settlement programs must reach a successful settlement deal with the creditors or they don’t get paid.

Debt settlement programs grew significantly over the past 5 years after the new bankruptcy laws were passed in 2005 which made Ch. 7 bankruptcy much more difficult to qualify for. Typically, if a person has any sort of income coming in he/she will only qualify for Ch. 13 bankruptcy. Ch. 13 bankruptcy is similar to a debt settlement program however it negatively affects credit scores for much longer. Bankruptcy will stay on the credit report for a minimum of 7 years while debt settlement cases can be removed in just a few years.

It’s important to know how to find the legitimate debt settlement programs and avoid those that may cause more harm than good. Luckily with this new legislation most of the shady companies will be pushed out of the market. Still it is important to ensure a debt relief company is certified and legally backed. The easiest way to do this is to use a free debt relief network. They investigate and only recommend the very best companies that are established and have proven results. FreeDebtReductionHelp.com is considered one of the best debt relief networks and most experts would highly recommend their free services.

Only consumers and small businesses who have at least $10,000 in unsecured debt and are experiencing a legitimate financial hardship will qualify for most debt settlement firms. The risk of entering debt settlement programs has been significantly reduced with the passage of these new FTC laws and most people will now consider this a legitimate debt relief option.

Check out www.FreeDebtReductionHelp.com to speak with a debt relief specialist for a free consultation. They are very helpful and will go over all debt relief options for free.

Contact Information

Michael Smith

COO

United Debt Associates

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