Credit Debt Relief - Eliminating Unsecured Credit Debt is Not That Difficult
What is an unsecured debt? Well, if you know the answer, getting rid of your unsecured debt is going to be easy. An unsecured debt is an advance from a lending Company for which no specific collateral has been offered. That means no specific asset is mortgaged or pledged to the lender in order to cover the default risk! Most consumer financing loans, short term loans given to Companies with exceptional credit ratings and credit cards issued to mass market fall into this category. Let us now consider as to how we could eliminate the unsecured debt without having to worry about the consequences.
The most common method which could be employed for this purpose is filing for bankruptcy protection. This could be done either under Chapter 13 or under Chapter 7. Since the unsecured debt does not give the lender the right of lien over any assets or property belonging to the debtor, in the event of default, the lender cannot seize or sequestrate any of the property belonging to the debtor. This means that the lender does not have any recourse to the assets or property of the borrower.
For instance, if you default on your credit card, the credit card Company cannot seize any of your property, sell it and apply the proceeds towards settling your outstanding. However, it must be born in mind that the creditor can activate a legal action holding the borrower personally liable for the debt. If the judgment is against you, the creditor can obtain a garnishee order to freeze your income streams and to have them all directed towards settling the debt. This is the major risk involved with unsecured advances.
Therefore, it is recommended that the consumer, under strict legal advice, explore the possibility of filing for bankruptcy under Chapter 13 of the Bankruptcy Code. This is important because the new reforms to the Code do not let the debtors file for Chapter 7 bankruptcy without sufficient proof to the fact that the debtor is unable to service the debt. Under Chapter 13 reorganization, a time period of 3-5 years will be given to the borrower to service the debt according to an agreed settlement plan. At the end of the settlement plan, the remaining unsecured debt will be wiped out from the records. Debtor is set free.
Under Chapter 7 cases, the debt will be wiped out in full but the chances are more that some of the assets of the borrower other than those that are exempted will be sold by Court to settle part of the debt. If you are confident that the assets or property you hold are exempted assets then you can eliminate the total debt without having to worry about loosing your property in the process. Therefore, bankruptcy is the most sought after method to eliminate unsecured debt.
Debt settlement is a legitimate alternative to bankruptcy and should only be considered by consumers who have at least $10k in unsecured debt and are experiencing a financial hardship. To compare debt settlement companies it would be wise to visit a free debt relief network that will provide a free debt consultation to determine which option is best for you.