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Debt negotiation and arbitration amounts to the middle ground between living with overburdened credit and filing for bankruptcy. As our debts mount and payments slip, the phone begins to ring with collection personnel and the mailbox fills with dunning letters. Often, the debt picture is so overwhelming that bankruptcy seems to be the only way out – and oddly enough, sometimes bankruptcy is tempting. The notion of thousands of dollars in credit debt wiped clean seems to be a dream come true. But bankruptcy has its consequences.
Bankruptcy
You’ll be unable to obtain any credit for at least two years. After that some credit card providers will offer a card that requires you to put down a deposit in order to use it. In other words, you’re drawing against an account that they’re holding. Perhaps six months to a year after that, the card company may grant you a line of credit that starts at $250 and works its way up to $800 or $1000 if you are prompt with your payments for another year or so.
That’s about all the credit you’ll be able to gain with a bankruptcy filing on record. Don’t count on being able to buy a car or lease one; you’ll be dealing principally in cash for some time to come. When you do become eligible for loans, the interest rates will be at the top of the legal range.
Coming to an Agreement
Restoring your credit after bankruptcy is a long and not so pleasant task. Borrowing is not an option for a long time. That’s why debt arbitration and negotiation is worth considering. There are down sides to this process as well and black marks that appear on your credit rating, but nothing like what occurs with bankruptcy.
After an extended period of late payment or no payment at all, most creditors will consider settlement. They take the position that something is better than nothing, and that puts you in a good position, to a certain extent. If their alternative is bankruptcy on your part, then partial payment looks like a good idea. If the debt at issue is a couple of credit cards and maybe a medical bill or two, it may be something you can handle on your own.
Bringing in a Professional
If your debt picture is more complicated than that, a professional debt negotiator working on your behalf may be a good idea. If you get into a negotiation position with a creditor, they will probably throw a proposal out. You are not obligated to take it, and a professional will keep you from doing so. There’s some value to give and take on these issues, and also value to having time pass by while the issue is left hanging. Those creditors want to get paid, and want the issue behind them. For the debtor in negotiation, patience is a virtue.
Don’t expect to see your debt negotiated away. Your negotiator is seeking to reach a debt level for you that is reduced, and that you can handle. In the case of major credit cards and merchandisers, debt negotiators often know the enemy pretty well. They have an idea of what percentage of the debt must be paid in order to be acceptable to the creditor. If they don’t, be prepared for some fencing.
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