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By johnking967
Debt relief programs provide the debtor various options like seeking credit counseling as a precursor to enrolling in a debt management program. The encumbered may also choose to opt for consolidating debts. Negotiating with creditors and debt settlement is a distinct possibility for debtors who are on the verge of filing bankruptcy. The last, and the least desirable option, is filing bankruptcy with the hope of resolving debts that can be repaid, and abstaining from paying those that cannot be requited. The effectiveness of the proposed debt relief solutions vary depending on the individual's state of affairs.

Debt Relief Options

In the article titled, Debt Elimination Strategies, debt relief options like consolidation, refinancing, credit counseling, and enrolling in a debt management program have been discussed in detail. The focus of this article will be on the remaining strategies, viz. debt settlement, cash out refinancing, and filing bankruptcy.

Debt Settlement: For a fee, a professional debt settlement company can help debtors get rid of debts by negotiating with creditors to settle for a small percentage of the amount that is due. Debt settlement is a legal solution that is appropriate for people who are on the verge of filing bankruptcy. It is a very expensive option that involves people paying outrageous fees, often amounting to 15% or 18% of the outstanding debt. Creditors agree to debt negotiations with consumers who are three to six months behind their payment schedule. Money that is forgiven in lieu of debt settlement is subject to tax.

Although debt settlement does have a negative impact on credit scores, given that the consumer has already defaulted on debts - the impact of which is felt on the credit score - settlement may not impact the credit score as negatively as anticipated. Moreover, debt settlement is not synonymous with not getting sued. Creditors may persist in their efforts to collect debts rather than settle for less. This in turn may propel them to obtain a writ of garnishment from the court, thus allowing them to recover their dues by wage garnishment. Considering that up to 25 percent of the debtor's salary may be withheld in lieu of garnishment, the debtor should definitely try and explore other alternatives of discharging debts.

Hence, the other debt relief options, viz. debt consolidation, cash out refinancing, credit counseling, and enrolling in a debt management program should definitely be considered.

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