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Imagine Zero Debt

John Rowley - Monday, February 09, 2015

Debt settlement is a legitimate and legal way of solving your debt problem without bankruptcy. Though the economy may be showing signs of life, many consumers remain in financial distress, suggesting that foreclosures and bankruptcies are likely to remain high for the next several years. And a recent analysis by the International Monetary Fund predicts about 14 percent of the $2.5 trillion in outstanding U.S. consumer debt will turn sour over the next few years and the current 10 percent charge-off rate on credit card debt will soar even higher. The combination of high consumer debt burdens and growing bankruptcy filings will surely slow the pace of economic recovery because debt service takes precedence over new spending. Put differently, until household balance sheets are back in order, consumer spending will be severely constrained, and household spending typically accounts for about 70 percent of total economic activity.

Here are five approaches to dealing with excessive debt: 1) remain the same 2) credit counseling 3) debt consolidation loan 4) home refinance 5) settlement


For the consumer, there are several downsides to using credit counseling agencies. Most important, the total amount of outstanding debt is not reduced. As with credit counseling, debt consolidation does not reduce the total amount outstanding. And because the consumer must have a decent credit rating or access to a home equity loan, a consolidation loan probably isn’t a viable option for most households with high levels of difficult-to-service debt obligations.

The great advantage of debt settlement over the alternatives is that the consumer can satisfy outstanding obligations while paying less than the full amount of the unpaid balances. In addition, after settlement the consumer’s credit report no longer shows open, delinquent items. Furthermore, debts resolved through settlement are no longer subject to collection calls or legal action.

Debt settlement companies can help consumers avoid a bankruptcy filing, which can impair credit scores for many years. And unlike bankruptcy, the consumer does not have to turn over all of the household’s nonexempt assets to a bankruptcy trustee.

Debt settlement can be viewed as part of the healing process to get distressed U.S. households back on a sound financial footing and thereby improve the odds for a sustainable economic recovery in the years ahead.

Clearly, there is a need to help financially distressed households with a process that is not as lengthy as consumer credit counseling but not as far reaching as bankruptcy. Debt Settlement is a middle ground that provides welfare benefits to consumers while at the same time boosting the prospects for the nation’s recovery from the worst economic downturn since the 1930’s. 

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