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Debt negotiation pros and cons

Kentucky residents who are overwhelmed by credit card debt may look for solutions that will allow them to reduce the amounts that they owe. Debt negotiation companies offer services for these consumers, and they can sometimes reduce a person's total debt load by 50 percent. While there are benefits to the debt negotiation process, there are also drawbacks that are important to consider.

Debt negotiation companies are not paid for their services up front, so people will not have to pay out of pocket until they have seen results. It typically takes about two to four years for people to get out from under completely with help from a debt negotiation company. Though debts will be settled, records of the debts will still remain on a person's credit score for about seven years.

Debt negotiation can result in greater savings than credit counseling because of the negotiated savings. However, a debt negotiation company usually cannot start the process until a debtor's accounts are delinquent. While credit accounts are delinquent, creditors could take action against a debtor by suing them for repayment. Because of missed payments and collection attempts, the debt negotiation process can damage a person's credit report.

Filing for personal bankruptcy is another way to seek debt relief. An automatic stay against most collection activities goes into effect as soon as the petition is filed. The two principal forms of consumer bankruptcy are Chapter 7 and Chapter 13, and an attorney can explain the eligibility and other requirements of each.

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