Debt Negotiation: A Better Legal Option in Solving a Debt Crisis?
The U.S. Bankruptcy Code offers business firms and individuals various legal means that will enable them to rise up from overwhelming debts and regain stability through financial control. One of these legal solutions is bankruptcy, which has two types: liquidation bankruptcy and reorganization bankruptcy.
Bankruptcy offers many advantages, such as the restructuring of the debt payment scheme to make monthly payments more affordable, the discharge of all unsecured debts (such as debts due to credit card use, medical bills, personal loans, etc.), or the liquidation of certain assets and properties to pay non-dischargeable debts (these are usually debts owed to the government).
There are different chapters in the U.S. Bankruptcy Code, each designed to address an individual’s or a firm’s specific financial situation. There is chapter 7 (which is liquidation bankruptcy), chapter 11 (or business reorganization, chapter 12 (designed for families of farmers and fishermen), and chapter 13 (or business reorganization designed for sole proprietors).
In the year 2010 alone, the U.S. federal bankruptcy courts recorded the filing of more than 1.5 million personal bankruptcy cases. Millions of American individuals and hundreds of business firms (both small and giant firms) resort to bankruptcy due to the many advantages it offers. However, a good business lawyer would not right away offer bankruptcy as the main solution to overwhelming debts. He/she will first discuss bankruptcy’s advantages and disadvantages, as well as the benefits and detriments of other legal means, like debt negotiation.
The Raleigh bankruptcy lawyers at the Bradford Law Offices, PLLC, explain that debt negotiation is a way to restructure your financial obligations and create a new repayment plan that is more reasonable for your current financial situation. Additionally, debt negotiation may provide you with the following benefits, including:
- Minimizing the debts you have left to pay;
- Paying off a large portion of debts all at once;
- Lowered interest rates; and,
- Lengthening your repayment period.
Debt negotiation may also prove to be better due to the more manageable payment plan that it offers. This is because debt negotiation:
- Does not require a litigation process (which bankruptcy requires);
- Offers debtors the choice of paying the debt through a single/lump sum payment or through more affordable monthly payments;
- Frees the debtor from being harassed by debt collectors, as well as from lawsuits and any legal action that will result to the forced sale of his/her properties ;
- Reduces or defers interest payments, lengthens the time span of payment, and allows the consolidation of loan payments; and,
- Reduces the amount of the loan to more than half its original sum.
According to Debt.org: America’s Debt Help Organization, debt settlement is a negotiated agreement in which a lender accepts less than the full amount owed – sometimes significantly less – to legally settle a debt. There is considerable risk to this debt relief option, though; it is not accepted by all lenders.