Debt Solutions >Debt Settlement What it does A debt settlement company works as a go-between for a consumer and their creditors. The settlement company will assess a consumer's debt and negotiate on behalf of the consumer with the creditors to create a repayment plan for cents on each dollar owed. Benefits A debt settlement or debt negotiation program can drastically reduce the overall amount of time until complete payoff. Typically, this reduction can reduce a consumer's outstanding debt to about 50% of the original thereby decreasing total time to payoff by at least half. Drawbacks Many debt settlement companies will not even look at your application unless you have over $20,000 in unsecured debt. This is because the debt negotiations essential for the success of the program are not possible unless the amount of debt makes it valuable to the creditors to compromise for a portion of the unpaid balance. To further strengthen the negotiation process, many debt settlement companies will tell their clients to stop paying their bills. This will make the creditors more afraid of the consumer going bankrupt and will allow the debt settlement company to defer greater benefits on the consumer. However, this will also greatly damage the consumer's credit (almost as much as Bankruptcy) making it practically impossible for them to get a home or finance a car. Conclusion Debt settlement is better than bankruptcy but not by much. It is only a viable option in worst-case scenarios where a consumer is extremely behind on their payments and has a large amount of unsecured debt that they are not able to pay. If a consumer is current on their payments then they would be better off personally and financially, if they explored one of the other solutions explained in this section. |
|
|