Debt is a common issue to most people and more than one adult may find themselves heavily in debt at some point. This may be a depressing situation, but did you know that you can negotiate with your creditors? If you follow some effective debt settlement tips, you may find yourself in an easier position. You may still be in debt, but you won’t have to spend sleepless nights thinking that you can end up homeless because of your bad credit.

Here are some debt settlement tips straight from the experts:

Though you may think that your creditors are aggressive, you can actually negotiate with them when it comes to your payment terms. Most credit companies do not like to write-off your debt because it would mean they would have to use collection agencies, which would require a high percentage cut. They may also end up with a fraction of what you owe them because you are pushed to file for bankruptcy. Settlements will be welcome especially if your situation is due to some unforeseen accidental expenses.

Be reasonable when you are trying to negotiate for a settlement. A common mistake most people make is to threaten their creditors. This would make things worse for you because it would narrow your options. Instead, you should reasonably get them to agree for smaller payments. There are also other arrangements you can make, but you have to think about your current situation and your projected financial state in the near future.

It is important to be realistic when it comes to your case. As much as possible, negotiate if you think that your finances will be better any time soon. It may take a few months, but if you think you can be able to hold on. You should arrange for debt settlement. If your computations will show that you won’t be able to pay your debts any time soon, you may consider filing for bankruptcy.

Do remember that bankruptcy should only be used as a last resort. This is a serious circumstance and there are many implications you should consider. It is not a reprieve from your debt, but is rather extreme since you have to give up some of your remaining assets.

So, you’ve exhausted all your options; you’ve tried everything you can, but you just can’t avoid going into bankruptcy.  What you need to know is that you still have options.  Even if you feel you have no choice but to declare bankruptcy, you still must choose what type of bankruptcy you want to declare.  As a consumer, there are two types of bankruptcy which are most commonly used; these are chapter 7 bankruptcy and chapter 13 bankruptcy.   Each type has its own advantages, disadvantages, and costs.  Which type you declare depends on your specific financial situation.

The first option you have is a chapter 7 bankruptcy.  This is what most people think of when you mention bankruptcy.  Chapter 7 bankruptcy involves total liquidation of assets and is the most extreme of the available options.  In this option, someone will be appointed to sell most of your assets and use them to pay your creditors.  Some of your assets may be eligible to be claimed as exempt.  All assets not labeled and exempt are eligible to be sold.  Much of your debt will be voided if your are successful in filing for chapter 7; however, you should check ahead of time because there are several types of debt which are not eligible and will still have to be paid.  The cost for filing chapter 7 bankruptcy is around $300 and can only be done once every six years.

Not everyone can file under chapter 7.  You should file for chapter 7 only if you are incapable of paying back your debt.  You must undergo a “means test” to determine you are truly incapable of paying back this money and therefore eligible to file for chapter 7.  Also, if you make more money than the most people in your state, your creditors may request that your case be dismissed.  If their motion is passed, you would not be allowed to file for this chapter of bankruptcy.  Another case in which you would not be allowed to file this type of bankruptcy is if you had been found to have violated behavior outlined in the Bankruptcy Code.

The other common bankruptcy option for consumers is Chapter 13.  Under this option, a person can work out a schedule to pay off all or part of their debt with future earnings.  The time allotted to pay off the debt is 3 or 5 years, depending on the court’s decision.  In this option, the debt is not cancelled; repayment is simply delayed.  This option also allows you to keep your property and assets.  The costs of filing for this type of bankruptcy are also around $300.

Similar to filing for chapter 7, Chapter 13 bankruptcy also has some restrictions.  Just like Chapter 7, there are certain types of debt that are not eligible.  You must have some sort of steady income to apply for chapter 13, otherwise you have no proof that you can pay off the debts within the allotted time period. There are also limits as to the size of the debt covered under this plan.  If your debt is too large, you will not be allowed to file.

The two other types of bankruptcy available to consumers are Chapter 11 and Chapter 12.  Chapter 11 is generally used by businesses as a way to restructure debt.  This option is much more complicated and expensive than the other two and should only be used the Chapter 7 and Chapter 13 bankruptcies are not options.  You should also discuss this option with a lawyer before you proceed.  Chapter 12 bankruptcy can only be filed by those who own a farm or are fisherman.

These are the options available for you to file for bankruptcy; however, that doesn’t mean they are you only options.  There are many alternatives to bankruptcy that you should research prior to filing.