Bankruptcy Facts & Debt Settlement

Bankruptcy Facts & How They Affect You.

  

Debt Settlement
     
Bankruptcy Facts About Discharge
At the end of the legal proceedings, the "bankruptcy adjudication" (a finding that a person is "bankrupt") discharges the person's debts. The discharge acts as a forgiveness of personal liability for all debts incurred prior to filing. In most instances, creditors can't try to collect debts that have been discharged. Once discharge is granted, former creditors also have no claim on future income.

In exchange for this "fresh start," a debtor must turn over all non-exempt property to a court-appointed trustee (see Chapter 7 below). The trustee is required to sell the property and distribute the proceeds to the creditors.

A debtor can be denied a discharge for certain "bad acts" such as concealing or fraudulently transferring assets prior to filing.

Even if a discharge is granted, certain debts can never be discharged. These include: alimony and child support, student loans, taxes, and any debt incurred through the debtor's fraud or theft.		   Debt Settlement, or debt negotiation, is the act of contacting your creditors and negotiating a lump sum payoff of your debt. If you are behind on paying your debts, sometimes you will even get a letter from the creditor directly offering a settlement amount of around 50% of your balance if you pay them in full within 10 to 20 days.

How To Negotiate Terms To Payoff Your Debts
You can do this, directly, or you can hire a professional debt negotiator, or arbitrator. It is not uncommon to pay 50% or less of the principal on your debt as settlement in full.

If you have access to money to use to make a lump sum payoff of your debts, then this will save you the most money in interest, and principal payments, of any debt relief program outside of bankruptcy. You should keep in mind, however, that some creditors may report your settlement to the major credit bureaus. However, when trying to get out of debt, and protect your credit as much as possible, debt settlement might be an economical option for you.
     

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