What is a Debt Settlement?
A debt settlement is the process of negotiating with creditors (lenders) to accept payment that is less than the full amount of the debt owed. Debt settlement is sometimes called debt arbitration or debt negotiation. Once a debt settlement is agreed upon and completed, no further money is owed to the creditors.
Dept settlement is not as easy as some companies claim. The classic rule applies: if it sounds too good to be true, it probably is. Be wary of companies that guarantee they can remove unsecured debt, promise settlement for pennies on the dollar or ones that tell you to stop making payments to your creditors.
Who can qualify for a Debt Settlement?
Generally speaking anyone with a sizeable amount of unsecured debt can benefit from a debt settlement program. Unsecured debt refers to debt that is not backed by real assets like homes or vehicles. Credit cards are common example of unsecured debt.
The best case scenario is that a person has some lump sum of money to use in order to settle the debt. You may also set up a special account to save money for debt repayments. Be wary of companies that demand that you pay the company and then they will manage the debt payment account on your behalf. You should have access to the account at all times and it should be housed at a FDIC backed financial institution.
Contact us today to find out if your situation merits a debt settlement or some other type of CleanStart legal service.
How does the Debt Settlement process work?
The process of debt settlement basically involves a negotiation on behalf of the debtor (exe: credit card holder) with the creditor (exe: credit card company).
The details and strategy of the negotiation differ with each personal situation and Credit Card Company. Some companies take a more aggressive approach to settlement while others are happy to take 25% – 65% (or lower) of the existing debt. They are willing to settle for these amounts because if a debtor goes into bankruptcy, it is likely that the credit card company will not be able to collect any of the outstanding debt.