As long as consumerism flourishes nearly all of us are tempted to spend more
then we can afford. Some people who have resources can successfully manage to
remove the debts by repayments while there are others, who for a number of reasons,

like joblessness, illness, or lack of financial resources cannot. More and more
of the consumers today are able to afford only the minimum payments on their
credit cards or even worse is that they are unable to pay any balances. Many
of these distressed folks find themselves contemplating a
bankruptcy filing. Bankruptcy on the
other hand is a heritage you will have to live with for many years.



You know for how long this bankruptcy filing stays on your record? At least seven year. Should you face bankruptcy? No. There are ways to handle such situations.



You can either adopt debt settlement or credit
counseling for debt assistance. The point you must understand is that
these two terms though have some similarities, are considerably different and
they should be taken into consideration according to your financial situation.

Credit Accounts

In a credit counseling program you will be required to close all of your credit accounts except accounts that are required for business needs and accounts with very small balances. In a credit debt reduction you need not to close the accounts. In fact you should keep a credit card handy for ease and emergencies.

Repayment Term

The credit counseling program usually takes a long time to eliminate
your debt then credit debt reduction services. Averagely, you will be consolidating
a debt in a period of 5 years. Unlike credit counseling services, debt reduction
programs often get the borrower clear of credit debt in less then a year.

Cost Effective

You save in debt reduction plans unlike in credit counseling. In credit counseling you have to pay back the entire amount you owe to the creditors but in debt reduction the terms and money owed are renegotiated with the creditors. The creditor allows a borrower, enrolled in debt reduction program, to pay a portion of the balance. Settlement amounts vary from 20% to 60% of the amount owed. The average debt settlement amount repayable in the industry is about 50% of the total owed.

Credit Score

In debt settlement plan, the status of your accounts and credit
score remains unchanged. If an account is current it will stay as current.
The good thing about it is that at the complete repayment of the debt by debt
reduction plan the creditor reports that the account has been '"settled in full"'.
In case of a credit counseling program, the credit score is affected as most
of the credit-reporting agencies, after three payments have been made, re-age
the accounts of borrowers enrolled in credit counseling services.

Ease in bargaining with the creditors

In a credit debt settlement plan all the creditors are contacted immediately to inform them about your financial adversity and to resolve the matter through negotiated debt reduction agreement. In credit counseling a debt repayment proposal is submitted to the creditors who are free to accept or reject.