When people are no longer able to cover their current debts, their first move is to find available alternatives that can help them do away with their financial problems. To some, they choose going through debt arbitration. Debt settlement is actually a legal process of negotiation for the reduction of the amount of obligation. It is possible that the creditor or group of creditors allows the elimination of certain percentage from the total obligation. This type of arbitration includes mostly unsecured debts of the debtor such as credit card obligations and medical bills.
Debt settlement versus Chapter 13 bankruptcy draws the significant differences between the two. Studying this matter is very vital if debtors intend to free themselves from the trouble of their debts. These two are similar in nature because both alternatives involve debt resolution. While Chapter 13 bankruptcy primarily involves the court because it is necessarily a legal proceeding, debt negotiation is actually a private affair between the debtor and his creditor. As the term suggests, it is a more relaxed approach to outstanding debts.
Both alternatives allow the same percentage of debts subject for repayment which ranges from 30% to 50%. Because Chapter 13 bankruptcy is administered by the court right after the petition for bankruptcy is docketed, the parties have no control of the case. The respective attorneys of the parties are fully in-charge of the progress of the proceeding. As to debt negotiation, the consumer-debtor has control on the progress of the negotiation.
The records pertaining to the Chapter 13 bankruptcy case, later on, becomes a public property open for reference and study. This is not case in debt negotiation because the parties can opt to keep all records of the negotiation to themselves only.
Some are saying that the one interesting aspect about debt arbitration is that the consumer-debtor is given the flexibility in settling his debts. But for Chapter 13 bankruptcy, the debtor is totally obliged to pay whatever is the amount imposed by the court to be paid.
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