- In debt settlement, the debt settlement firms negotiate with creditors to reduce the actual principal balance of their clients' debts.
- Debt settlement is often the only affordable option available to avoid filing for bankruptcy
Debt Settlement: An aggresssive approach to Debt Relief
Debt settlement is generally viewed as a more aggressive approach for consumers than credit counseling, and although it can be more risky, the potential savings achieved in debt settlement are often much greater. In debt settlement, the debt settlement firms negotiate with creditors to reduce the actual principal balance of their clients’ debts. Average negotiated settlements are around 50%4 of principal balance, with lower settlements seen by many consumers.
| Debt Relief Options |
|---|
| Background |
| CCCS History |
| CCCS Pros |
| CCCS Cons |
| Debt Settlement History |
| Debt Settlement Pros |
| Debt Settlement Cons |
| Cost Comparison |
| Alternative Solutions |
| Conclusion |
Because debt settlement firms negotiate on the principal debt, not the interest rate, many clients will have their debts resolved in three years or less. It is important to be aware, however, that during a debt settlement program no minimum payments are being made by the consumer. This will cause the face value of the debts to grow with over-limit and late fees. In addition, interest will continue to be applied and this additional amount should be calculated in to any savings estimations.
Back: CCCS Cons Next: Debt Settlement Pros
| 4. | Briesch, Richard. “Economic Factors and the Debt Management Industry.” Americans for Consumer Credit Choice. (August, 2009). |
Daly City, CA | December 01, 2010
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