Debt Settlement – An Alternative To Bankruptcy

DMB Financial prides itself on being part of a growing industry offering bankruptcy alternatives, which can close many doors for the average American. For the many that have filed, it was a last ditch effort that might have been avoided had the services of DMB Financial been known. In lieu of recent changes to the government laws regarding bankruptcy, debt settlement has become an increasingly accepted route to take in order to avoid the arduous and often expensive process of filing Chapter 7.

An Overview of the Laws
Last year, the government approved a bill called "The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". Under this new set of laws, the court decides whether an individual files Chapter 7 (forgiveness of all debt owed) or Chapter 13, where a debtor would have to repay at least part of their debt within five years from the time the bankruptcy case is filed. These new set of laws were passed in an effort to curb the number of people filing for bankruptcy as a means of financial management.

A Five Year Low As reported by Reuters and Bloomberg News, U.S. bankruptcy filings fell to the lowest level in five years since the new bankruptcy laws went into affect in October 2005. Personal filings fell to 1.45 million–down from 1.6 million the previous year. Total filings fell to their lowest levels since the year ending September 2001when 1.44 million filings were reported. Projections are that filings over the past year will be at 1986 levels.

In addition to a decrease in personal filings, individuals are also changing the way that they are filing. About 60% of individuals now file under Chapter 7, which allows people to wipe out their debts; this is down approximately 80% from the four months leading up to the new law. The remaining file Chapter 13, which requires debt repayments.

Changes Impacting Individuals
The most significant changes affecting individuals filing for personal bankruptcy deal with a new "means test" and the requirement that individuals consult with a Consumer Credit Counseling Agency.

The "means test" measures a debtor's ability to repay debts based upon their state's median income. If the debtor earns more than the median income in their respective state, they will be required to file Chapter 13 as opposed to the more encompassing Chapter 7 filing.

An individual filing bankruptcy must also first enroll in both a Credit Counseling program as well as a personal financial seminar prior to filing. The average consumer will undoubtedly have to pay a fee for these two requirements making the process a more expensive one. The idea behind these new mandates is to steer people away from filing unless it is in fact a last resort.

Economic Impact
While more and more individuals and families may not qualify for Chapter 7 but find themselves faced with debilitating debt, companies such as DMB Financial become a positive alternative. Contrary to the belief of some, the average American is not trying to escape their obligations, but instead has suffered from a recent job loss, divorce, insurmountable medical bills, or is burdened with high interest rates and finance charges on loans and revolving lines of credit (credit cards). These consumers are also struggling with the all-time high costs of energy and housing, and are looking for some sort of salvation from their escalating, and in some cases, uncontrollable financial burdens. Fortunately, debt settlement companies are just the alternative needed to help some consumers turn their financial situation around without carrying the malevolent bankruptcy mark on their financials for years to come.

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