Debt settlement is often used when someone is dealing with overwhelming debt. It has been an option for years and is still a popular option. Debt settlement is the process of negotiating reduced amounts of debt with your lender. The debt is settled, but not the account is closed. This is one of the most important debt relief options.
Debt settlement is often a negotiated settlement with your unsecured lender. Commonly, lenders will agree to settle for a large portion of the outstanding debt: maybe around 50%, though favorable results can still vary widely. When settlements are finalized, both parties are put in writing into a contract. Your debt settlement service will handle the legal issues for you.
Your lender may not agree to settle for such a large amount, or may take a long time to do so. If this is the case, your settlement provider may make payments to your outstanding debt in increments. Your debt relief expert may also work to make payments to your creditors on your behalf. If you have other assets such as stocks or bonds, you may receive payments from your settlement provider in a lump sum. All debt settlement services are expected to abide by the laws governing debt settlement negotiations.
When debt settlement is being handled by a third party, it is still important to follow through with payments to your creditors on an ongoing basis. You will want to make all of your monthly payments on time and never miss them. If you miss a payment, contact your creditor immediately. Some debt settlement companies will not pursue a debt settlement until you have made all of your monthly payments on time – in some cases they may even give you some extra time without any charges.
As you work with your debt settlement company, it is critical that you remain proactive in making payments to your creditors. If you stop making payments, your creditor can file legal action against you. By paying off your outstanding balance, your debt settlement company can then begin negotiations with your creditors to agree upon a lower interest rate and a payment plan that will hopefully benefit you.
Many individuals use their credit cards to purchase consumer goods. For this reason, debt settlement can be used to reduce the amount of debt on your credit cards. In most cases, debt settlement is less expensive than filing chapter seven bankruptcy. Once you have paid off your outstanding debt, you will need to keep up with the payments to avoid incurring additional debt. However, if you follow the guidelines set forth in your credit card debt settlement agreement, you should find that it is more affordable than bankruptcy.