What is the difference within debt consolidation and debt workout as we mention card credit debt elimination or reduction and other types of unsecured debt?
As you read many articles about debt workout and debt consolidation, there is not certain difference between two types of services. I prefer to describe debt workout as worked out settlement of credit card debt. Let's assume that you have 10.000 $ credit card debt, in order to agreement you made with credit card company you would pay 5.000 $ as settlement on your full debt. This case is called as credit card debt workout. Companies which uses that way, usually call themselves as debt reduction, debt management, debt settlement, debt workout or sometimes debt consolidation company. Anyway in my opinion debt consolidation refers to refinancing of debt through taking debt consolidation loan or credit counseling company to pay at once full debt.
In which cases credit card companies accept debt workout?
Credit card companies uses card credit reduction way if they only feel settlement of debt will be best for refinancing debt. If the consumer is close to bankruptcy, creditors uses debt settlement card. Because they know that they would receive nothing in most bankruptcy cases. So creditors prefers to choose discounted settlement debt workout option. For sure it is better than taking zero dollars in a bankruptcy.
How do the creditors decide who is a candidate of bankruptcy?
1. People who has had trouble trouble with making debt payments for several months on credit cards or other type of loans is mostly defined as candidate of bankruptcy by creditors.
2. People who does not have security deposits such as homes, cars.
3. People whose current or possible future income would not be able refinance their financial status.