Two fastest ways of eliminating debt are bankruptcy and debt settlement. Most debtors prefer to keep bankruptcy as their last option because it has a major negative impact on the credit rating. It stays on the credit report for the next 10 years. Settlement also impacts the credit rating negatively but not as much as bankruptcy. With the recent change in the bankruptcy laws it is no longer easy to qualify under chapter 7. If you qualify for only bankruptcy under chapter 13 then you might have to repay all your unsecured debts through easy payment plan. Hence settlement is a better option.
In this method the debtor and creditor agree on a reduced amount as a full balance. The debtor needs to pay the new balance amount in a single down payment; the remaining debt is legally eliminated. Most creditor agree to settle the account which is about to be sold to a collection agency or if the debtor is on the verge of filing for bankruptcy. In either of the above scenarios the creditors cannot recover a major part of the loan amount.
A debtor trying to get his debt eliminated must stop making payments on his account. Creditors are willing to settle accounts which are at least 90 days past their due date. The debtor can save this payment money for the negotiations.
Accounts have been settled for as low as 25 % of the total balance. On an average a debtor can expect 40 % to 60 % of his debts to be eliminated.
The procedure involved is simple. So, the debtor can negotiate the deal himself or he can take help from settlement companies.