The most obvious choice for people struggling with their unpaid debts is bankruptcy. Technically, this is due to the apparent lack of any reasonable alternative. This was revealed more clearly in the recent global financial crisis, which resulted in large numbers of people having no job and insufficient resources to continue paying back the debts that they had. As a result, the world witnessed the highest number of bankruptcies in financial history.
At first it did not occur to people, that debt negotiation could improve the situation, but when they realized the possibilities, many people began to take up the opportunity of debt relief programs. These are programs designed to reduce debts and improve the rates at which the credit arrears are repaid. These programs can help people otherwise under threat of bankruptcy to get back to normal life.
Debt negotiation is better than bankruptcy. Although there are some limitations here and there, debt negotiation remains the best alternative for people with unsecured debts, that is, for individuals with personal loans, student loans, or even credit card debts. To be eligible for debt negotiation, one needs to have a debt of at least US$10,000. Appeal for adjustment is allowed for those who are insolvent but fulfill these conditions.
As compared to bankruptcy, the limitations are much less severe and the outcomes more satisfactory, both to the lending institution and the debtor. Depending on how hard the person finds it to repay the debt, debt reductions of up to 7% can be achieved. The greatest advantage of debt relief programs is that, unlike bankruptcy, there are fewer financial problems in the future. The only bad consequence of these settlements is that the borrower is put on record as having a bad credit history, and as such will not be able to take out bank or other loans easily in the future.
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