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Bankruptcy gives more complete relief than debt settlements

A resident of Arkansas who is facing overwhelming debt problems will understandably seek out professional help to find a strategy for debt relief. In just about every case, a person in that situation is solidly in favor of paying off his or her debts in a payment plan of some sort. However, prior to retaining the services of anyone, the individual should make a thorough search and act carefully. There are unethical and usurious companies around every corner so that caution must be exercised. The consumer should also compare the features of any programs offered with the powerful and swift remedies available in a federal bankruptcy proceeding. 

One segment of the consumer debt market consists of debt-settlement companies. This system has the consumer paying in monthly payments into an account so that offers can be made later on to settle the account at a discounted amount. All the consumer has to do is pay into the account. The company will negotiate reduced payoffs for the loans and when there is enough in the client's account, it will settle up with the company.

The procedure is theoretically repeated until all loans are paid. However tempting this solution may seem on the surface, there is a danger that the debtor will end up in hotter water than when the process started. For one thing, the debt settlement company has no way to control the creditor during the time that the consumer is making payments into the company. The harassment will more often than not continue, and in fact, there is nothing to stop the creditor from filing a lawsuit against the borrower.

Thus, in Arkansas and elsewhere there are many problems that can arise when one is using a debt-settlement company. The company may also settle only a portion of the debt or it may settle for only a tiny reduction which will make the time and trouble hardly worth it. In addition, the debt-settlement companies have been known to take exorbitant fees out of the client's escrow account, putting the client in a position where it is even tougher to negotiate a resolution. Unlike the piecemeal solutions of debt settlement and debt counseling companies, bankruptcy offers a government-sponsored program that wipes out credit card, medical bills, and other unsecured debt quickly and forever. 

Source: marketwatch.com, "10 things debt-settlement companies won't tell you", Elizabeth O'Brien, July 19, 2016

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