For anyone living with a lot of debt, life can feeling overwhelming.
Even though things might seem great, you actually have a few options when it comes to debt relief and debt settlement. There's no over-night cure, but debt settlement is one of the most effective ways to get out of debt.
Here is what you should know:
What Is Debt Settlement?
Essentially, debt settlement is where you and your creditors come to an agreement on a specific amount that will fully discharge the debt owed. Generally, this amount is less than you actually owe, although how much less will depend heavily on your specific situation.
In most cases it's wise to consult with a professional debt relief company.
How Does Debt Settlement Work?
Generally, the debt settlement company contacts your creditors and takes over your account, negotiating aggressively to drive down what you owe. The money to pay this debt is stored in a special savings account to demonstrate good faith that you can pay the bill. Once a settlement is reached and the money is available, the debt is paid.
Why Do Creditors Settle For Less?
Most other options will involve them getting far less money, or not even getting paid at all (in the case of bankruptcy). Debt settlement also has a distinct advantage in that it’s less legally complicated and therefore less expensive for your creditors. In short, negotiating with you and the debt settlement representative you’ve chosen is more cost-effective and more likely to result in less of the debt being paid.
What Makes Debt Settlement Different vs. Other Debt Help Options?
The first, and by far the most important, advantage is that it does less damage to your credit. For example, if you choose bankruptcy, your credit score will be dinged for a decade or more, and you’ll struggle to buy a home, buy a car, or even get a credit card in some situations. With a debt settlement plan, your accounts will be marked “paid in full” or “settled,” meaning that as you move forward, you’ll be able to secure credit more easily.
Another big advantage is that a debt settlement program will ensure that you can retain more of your assets. Depending on the bankruptcy you’re forced to engage in, you may lose anything from your house to your savings accounts; potentially everything. Furthermore, some debts simply cannot be discharged in bankruptcy, and the bankruptcy itself can be “rejected”, meaning that you can be legally returned to the point you were before, with all your debt still on your books.
In the case of bankruptcy, debt settlement protects your credit and saves you a substantial amount of money in court fees, legal consultations, and other problems.
How Do I Choose a Debt Settlement Company?
Not all debt settlement or relief companies will have your best interest - it can be a shady industry if you don't do thorough research in who you're dealing with. The best debt settlement companies work with the consumer to design a payment program that will allow their clients to become debt free in as short a time period as possible.
The settlement process involves extensive knowledge of consumer lending. You can try to settle it yourself, but an experienced debt negotiator is probably worth the investment.