There are many ways to eliminate responsibility and get out of the enormous burden of debt. The fastest of these forms are bankruptcy and debt settlement. Before selecting either of the two options, one must make sure that one is not only going for the current benefits, but one is even preserving the future benefits. Bankruptcy and liability agreements have their own advantages and disadvantages. We need to figure out which of these two options will be the most effective while keeping the future in mind.
Bankruptcy or insolvency is a legal way to get rid of large amounts of debt. A due process hearing is held and the debtor gets rid of all the debt they owe. If you have tangible assets in your name, these tangible assets are liquidated upon payment by creditors. If you don’t own any tangible assets in your name, the creditor loses every penny. The advantages of this method are only short-term, meaning: quick relief from liability and complete relief without making any payments to creditors.
We must keep in mind that with bankruptcy comes long-term problems rather than benefits. These problems include: inability to acquire loans as the creditor is hesitant to make loans to those who have filed for bankruptcy due to the threat of losing all the money borrowed. Even if creditors agree to make a loan, they do so on the basis of a high interest rate, collateral, deposits, and much less time to repay the loan. We should even keep in mind that employers provide employment based on the credit report. A person with a bad credit report might not be able to get a job and if he does then he is offered a very low salary.
Liability settlement is another quick method of eliminating debt. In this method, the debtor and the creditor negotiate with each other and the debtor is given a discount on the loan payment. This discounted amount is 70% lower than the original amount. During negotiations, interest rates may be lowered and the repayment period may be extended. The benefit of this option for the creditor is that they recover a part of their money.
The weak point of using this option is that the debtor’s credit report reports debt settlement. According to this report, creditors may be hesitant to make a loan, but they won’t be as hesitant as they would be if the credit report showed bankruptcy.