Debt-Is Debt Settlement Unfair on Lenders? Settlement and Bankruptcy Compared

March 21st, 2010

There are many persons who are of the opinion that debt settlement is unethical. Well, do not hospitals offer free service for those who are not in a position to pay for expensive lifesaving treatment? Have you never purchased a dough nut for an indolent person who just was not in a position to afford such a treat? Debt settlement is based partially on charity and partially on common sense. As far as common sense is concerned, lenders are aware that insisting on full and final repayment to a person who has lost his or her job and who has zero savings is a waste of time.

The moment such a demand is made, the individual shall file for bankruptcy and that will be the end of the matter. The issue shall languish in courts and the bankruptcy proceedings shall takeover. In such a scenario, lenders prefer offering a waiver ranging from 50% to 70% of the total amount owed. What this does is that it reduces amount payable by more than half. Secondly, the lender offers an installment facility. This means that a client who was well on his or her way to the bankruptcy court will be brought back and will be given an option to repay the debts in full.

This means that the chances of the lender recovering the money are higher. Secondly, the chances of the customer sticking to the same credit card issuer or unsecured lender after a debt settlement is also high. In case of bankruptcy, people run scared from credit cards and other such financial instruments. They will prefer to live well within their income. This may seem very good from finance point of view but that is definitely bad news for the average credit card issuer.

As far as charity is concerned, the government did a huge favor to the lenders by offering debt settlement in the form of the stimulus package. Charity and morality only demands that the same treatment be passed on to the average borrower. That is the reason why debt settlement is offered to borrowers who are finding it difficult to repay thousands of dollars of debt at a stretch.

Instances of lump sum discounts being a part of the settlement process has been very common. However, an installment facility to encourage individuals to develop the habit of regular repayment is something very new and novel. Just make use of this debt relief solution if you qualify for the same and your job will be done. You can kiss debt problems good bye.

If you are over $10k in unsecured debt it would be financially prudent for you to consider a debt settlement. There are organizations that exist called “Free Debt Relief Networks” that are a great place to start in locating legitimate debt settlement companies in your region. They provide free debt help and know where to locate the top performing debt settlement firms.

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