The financial markets and the regulators are busy cleaning their backyards after a major financial shock which originated from the Wall Street and struck economies all over the world.
Major financial centers were brought into disrepute and the stock exchanges plummeted to a record low.
The majority of the loans and investments which led to the crisis originated from the sub-prime mortgage loans.
These were then traded as collateralized debt obligations and concealed enormous risks which the average trader was unaware of.
As the crisis hit the market causing thousands of business failures and millions of job losses, the loans which were largely unsecured, remained unsettled.
To put the economy back on track, cleaning up the debris was essential.
For that, outstanding bad debts need to be cleared from the balance sheets.
This, in turn requires the cooperation of the borrowers.
State sponsored debt settlement schemes and private debt collection Companies have assumed the duty.
The settlement Companies negotiate with creditors to obtain sizable discounts on unsecured debts as their position will be prejudiced if they opt for legal action.
This situation arises due to the lack of tangible security.
Negotiation Companies can exploit these loopholes to win a better discount and a flexible repayment plan for the debtor.
Another option available to the borrowers is filing for bankruptcy protection under Chapter 13 or Chapter 7 of the Bankruptcy Code.
An automatic "stay order" will be enforced to prevent the creditors from pursuing any action against the debtor upon filing of bankruptcy under Chapter 13.
This will protect the debtor from any possible attacks by the lender by way of a garnishee order or by any other legal procedures.
Under the protection of a bankruptcy Court, the debtor can settle the borrowings within a period of 3-5 years.
Once the repayments are completed, the balance unsecured debt will be charged off.
If the borrower is unable to service the debt under any circumstances, filing for Chapter 7 bankruptcy can be viewed as the last resort.
The borrower can avoid settling the exempted debts and he will be allowed to retain the exempted assets.
The sales proceeds of the other assets, if any, will be applied towards settling the liability.
If no significant assets are held by the debtor, the full debt will be written off.
With the above methods, majority of the debt can be eliminated and the effect on your credit score will be considerably low.
Major financial centers were brought into disrepute and the stock exchanges plummeted to a record low.
The majority of the loans and investments which led to the crisis originated from the sub-prime mortgage loans.
These were then traded as collateralized debt obligations and concealed enormous risks which the average trader was unaware of.
As the crisis hit the market causing thousands of business failures and millions of job losses, the loans which were largely unsecured, remained unsettled.
To put the economy back on track, cleaning up the debris was essential.
For that, outstanding bad debts need to be cleared from the balance sheets.
This, in turn requires the cooperation of the borrowers.
State sponsored debt settlement schemes and private debt collection Companies have assumed the duty.
The settlement Companies negotiate with creditors to obtain sizable discounts on unsecured debts as their position will be prejudiced if they opt for legal action.
This situation arises due to the lack of tangible security.
Negotiation Companies can exploit these loopholes to win a better discount and a flexible repayment plan for the debtor.
Another option available to the borrowers is filing for bankruptcy protection under Chapter 13 or Chapter 7 of the Bankruptcy Code.
An automatic "stay order" will be enforced to prevent the creditors from pursuing any action against the debtor upon filing of bankruptcy under Chapter 13.
This will protect the debtor from any possible attacks by the lender by way of a garnishee order or by any other legal procedures.
Under the protection of a bankruptcy Court, the debtor can settle the borrowings within a period of 3-5 years.
Once the repayments are completed, the balance unsecured debt will be charged off.
If the borrower is unable to service the debt under any circumstances, filing for Chapter 7 bankruptcy can be viewed as the last resort.
The borrower can avoid settling the exempted debts and he will be allowed to retain the exempted assets.
The sales proceeds of the other assets, if any, will be applied towards settling the liability.
If no significant assets are held by the debtor, the full debt will be written off.
With the above methods, majority of the debt can be eliminated and the effect on your credit score will be considerably low.