Can debt settlement save your neck?
Have you been hit by the money bug? Do you find yourself in debtor’s prison and don’t know how to escape from it? Are you on the verge of becoming bankrupt? In such a case debt settlement may be the right solution for you. Just read on if you want to know more.
What is debt settlement?
Debt settlement is an agreement by which your creditor will accept a reduced sum of money which will be considered as full payment. The remaining amount will be forgiven.
Too good an offer to believe?
The idea seems incredible and sounds more like a scam. But it is a perfectly legal solution. Millions of people worldwide go for it.
Who are the people eligible for debt settlement?
Creditors will consider you suitable for settlement plans only if your financial condition is quite critical. You must have large outstanding credits or have been unable to pay your monthly installments for several months. You should appear like someone who is considering bankruptcy. Only then your creditors will be convinced that you are not in a position to pay the entire debt. So they will agree to a settlement plan. If they don’t then scare them by telling that you are considering bankruptcy. They risk losing the entire amount if you go bankrupt. But they can get a lump sum if they accept the settlement plan. It is relevant to mention here that if you want to go for a number of installments then your creditors will be reluctant to accept your offer. The debtors usually pay around 50% of what they owe to the creditors.
Confused how to start the process?
You can call your creditors and offer a settlement plan. However it will be wise to approach a debt settlement company. They would negotiate on your behalf with the creditors for a settlement program. You have to pay the settlement company for their services. The charges vary significantly from company to company. So do your research thoroughly. Roughly you have to pay 25%-35% of the amount reduced. The payments are mostly on monthly basis.
Know the advantages
You can avoid bankruptcy by opting for debt settlement. The creditors cannot take any legal action against you if you are in a settlement plan. You also have to pay less if you opt for settlement plan. Calls from collection agencies will be a thing of the past as the settlement company will handle them.
Does debt settlement affect the credit score?
Unfortunately it does. Some settlement companies include a credit repair service to remove the negative items which were caused by the program. However bankruptcy makes your credit score look worse.
Other Alternatives:
If you are not sure about debt settlement, you may consider debt negotiation or you may even consolidate your debts depending on your financial condition.
If you feel that rights have been violated during the settlement process then you can file a complaint with Federal Trade Commission.
Your inability to practice wise money management has resulted into your debts. But debt settlement can bring you out of rib-crushing, spine-tingling clutches of debt. So keep the above things in mind and decide if you want to go for a settlement plan.
Most of the services reviewed by this website are available or may be accessed from Australia (see 