The economic recession has too many people wondering how they can possibly pay their loans and debts the way they agreed. Too many people have lost jobs or are dealing with a pay decrease, or may even have new expenses they have to meet. These are very stressful situations for everyone. There is some hope, though, in finding that loans can be renegotiated, fees can be removed, payment schedules rearranged, and payments reduced so that paying the debt is manageable once again.

In the absence of criminal liability for debt and debtor prisons, the lenders realize that their options are limited. If a debtor refuses to pay a debt, the lender only has a few courses open to them. Reporting the default to a credit bureau hurts the borrowers credit ranking, but does not necessarily result in repayment. A lender may also resort to seeking a remedy in court, but this process is time consuming and expensive and only makes sense for large loans. Further, a court remedy may not necessarily result in repayment.

Because they know their options are extremely limited and not always effective, many lenders have begun to renegotiate loan terms because they realize there is a greater chance of receiving payment that way. Their goal is to recoup as much of the outstanding loans without increasing their costs. Lenders know that court and collection fees increase their costs so they prefer to avoid it.

Renegotiating loan terms and payments is a good way to go for both the borrower and the lender. The goal of the lender is to have the debt repaid as much as possible, so even though they have to give up the original loan terms lenders realize this is preferable to court or collection fees. This practice has become so prevalent that many companies and banks now have special hardship departments for handling these situations. They receive the renegotiation requests and then can negotiate reduced payments and other terms of the loan or credit card.

Renegotiating is an uncomplicated process that starts with contacting the company holding the loan note that needs to be renegotiated. Asking in a straightforward way for the hardship department or for someone who can renegotiate loan terms will ensure that you are put in touch with the right person. As you talk with this person, carefully and clearly explain your situation in as much detail as possible, and make sure you have a plan you can offer for their consideration. Avoid becoming aggressive or threatening with this person in any way so that they know you are making a good-faith attempt at repaying your debt.

It can take quite some time to renegotiate loan terms and the lender may wish to see any documentation you can provide to verify your hardship claim. Though it is a long process it can be rewarding to have the satisfaction of paying a debt you owe and not harming your credit further. You have nothing to lose. If you really are unable to pay your debt then the worst that can happen is that the lender will chose not to renegotiate. Ultimately, you would be no worse off than if you had not made the effort.

Wendy Polisi is the founder of Credit Repair College and Finance the Dream. Finance the Dream is the nations leading provider of Lease Option Homes,offering homes throughout the United States. For more information on fast credit repair please visit her at Credit Repair College.

For any individual considering filing personal bankruptcy, a key concern is of course what is the long term impact on your financial life of bankruptcy. One of the major issues some people are worried about is home foreclosure, and specifically which will be worse for them and their credit score, foreclosure or bankruptcy. But bankruptcy and foreclosure will impact your credit score differently, and are two different processes, so it’s not easy to compare apples to apples. Here is how you might approach making a decision.

To begin, a foreclosure stems from your mortgage loan, which is mostly like any typical type of secured loan, like a car loan. In the event that you are unable to pay, the lender will be protected because the debt is secured by your home, therefore the lender will repossess, or foreclose, on your home to pay your debt. In the same way as another asset such as a car, a foreclosure will be a major black mark on your credit and bring down your score.

Bankruptcy is somewhat different, because it is an organized way to wipe the slate clean of nearly all of your debt, both secured and unsecured. Generally, you can either get rid of, or discharge, debt, or set up a court-approved repayment plan. When it comes to which is worse a foreclosure or bankruptcy for your credit score, the big credit scoring companies will never tell you exactly. However by the time you have gotten over your head in a big way enough to go to bankruptcy court, your credit is probably already pretty poor, so that a bankruptcy will not hurt your credit score too much more.

Yet here are the big issues to consider before making a decision. If you still haven’t been foreclosed on by your lender, and you decide to file bankruptcy, remember that you can still lose your house to a sale because the mortgage lender is able to ask the bankruptcy court to allow a sale in order to pay your debt. A sale would more likely occur in a Chapter 7 bankruptcy, where most of your debt is discharged, while in a Chapter 13 bankruptcy you set up a payment plan that might allow you the chance to keep your home by making payments. Using a Chapter 13 bankruptcy could thus help you avoid foreclosure.

As for your credit score, a bankruptcy may not lower your credit score number too much lower, however your bankruptcy filing stays on your credit report for ten years. So with a bankruptcy, in five years you might have a better credit score but lenders could still see your bankruptcy filing from five years ago, and turn you down on that basis. Foreclosure on the other hand is like any other repossession or single bad debt. It stays on your credit report for seven years, but once you restore some good credit after a few years you could once again qualify for credit. It’s important to recognize then that your credit score is not the only thing to consider between bankruptcy and foreclosure.

Before choosing bankruptcy or foreclosure, it’s best to talk to a bankruptcy attorney and also a non-profit credit counseling agency. These individuals can help you determine how your debt, income and expenses will play out in either instance. For some people, it’s more important to protect their credit score; for others, it’s necessary to use bankruptcy to start over cleanly. If you’d rather save your home, you ay not care about your credit score. Talk to a professional to find out more before taking any steps.