What is Debt Settlement?
Debt settlement, also called d or debt resolution, is a process where you or your representative negotiate with your unsecured creditors to forgive a part of your debt.
Results can vary widely, but frequently you save between 40% to 60% of what you owe. Upon reaching an agreement, you pay the reduced, agreed-upon sum. In some cases, you will pay this settled balance in payments over a structured period. More frequently, you pay off the reduced balance in a lump-sum amount.
Debt settlement can be an excellent solution to your debt problems. If you carry more than $10,000 in unsecured debt and struggle with, or are unable to make, your monthly payments, consider debt settlement. A negotiated settlement can significantly reduce your debt, but it will impact your credit score. It is not a smooth experience for everyone. However, debt settlement offers a low monthly program payment, sizable debt savings, and short time to debt freedom. As the saying goes, "there's no gain without some pain."
Debt Settlement Pros and Cons
The biggest potential benefits of debt settlement are:
- Significant reduction of your total debt payment
- Get out of debt faster
- Lower your monthly payments
However, weigh the benefits against potential cons:
- Damage to your credit
- Possible taxable income
Debt Negotiations and Debt Settlement Companies
- DIY or Professional Debt Reduction Company? Although some people decide to do a debt settlement on their own, it requires time and skills that are best performed by a professional. Only work with a debt settlement firm that does not charge up-front fees. Any debt settlement firm that telemarkets its services is not allowed to charge up-front fees. Lawyers and debt settlement firms that meet with clients face-to-face can charge up-front fees.It makes no financial sense to work with any firm that charges you fees in advance when you can find reputable, experienced settlement firms that won’t charge you a fee for any account they settle, until after they finalize a settlement. A firm that charges you for their services only after an account is settled has a higher motivation to settle your debts. If you have decided that debt negotiation is the right debt relief option, then your next step is to determine if you should do it yourself, or seek out a professional debt settlement company. It is essential to be in contact with your creditor as soon as possible. There are many benefits to choosing a professional debt settlement company that can help you evaluate your financial situation and get you to the finishing line.
- Reputable Debt Settlement Companies It is crucial to find a debt settlement company with experience that translates into strong connections with the creditors and a reliable service department. To find a reputable debt settlement company, look to see if the American Fair Credit Council (AFCC) accredits them. The AFCC has strict codes of conduct and monitors its members for compliance with FTC rules. Also, check out provider reviews and the Better Business Bureau.