Debt settlement is a viable alternative to filing bankruptcy and it is becoming increasingly popular among the people with over $10k of unsecured debts. Creditors are ready to negotiate. It is the best way to literally eliminate 50% of the total debt amount with debt settlement. The chances of fraud and cheat have increased in this field as many fake firms are misleading people and are creating confusion for them. In this regard, the Government has taken notice and took legal action by the formation of New Regulations for Debt Settlement Companies that would make this process more transparent and genuine.
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According to the Government, the New Regulations for Debt Settlement companies contain certain conditions for the debt settlement firms to be legitimate. The first and the most important component of these law state that no charges should be paid by debtors to the debt settlement firm until the deal between this firm and a creditor is finalized. This has proven to be a real relief as now due to this clause the fake companies have been vanished from this sector. In the past, debt relief companies used to charge heavy amount of fees from debtors and they never bothered paying attention towards negotiations. This resulted in high failure of settlements and more burdens on the borrowers. In this way, they had to pay the settlement fees along with their heavy debts. This further added to the mistrust of people and increased the ratio of bankruptcy cases.
New regulations for debt relief firms have bound the practice of demanding high service charges for the services and have forced them to induce creditors over minimum amount of payment by borrowers. This amount may minimize up till 50% of the total amount which will be convenient for the debtor to pay. This law has created a positive impact of settlement and more people are attracted towards it. Although Bankruptcy is a direct solution but it has a number of adverse effects namely bad credit score and no loan sanction for a period of at least 8-10 years which means that your credential future will end. Moreover, high amount of fees is to be paid to lawyers for filing bankruptcy. On the other hand the lenders will not get any money back and they will have to face total loss if a bankruptcy petition is filed.
Looking at this situation, one should never consider bankruptcy as a good option. The Government has named this option as an economical failure. These New Regulations for Debt relief firms have turned many people towards debt negotiation, resulting in low bankruptcy cases and relief for consumers.
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