The Benefits of Debt Settlement

Many consumers across America are struggling to pay their bills. They may be deep in credit card debt, behind on medical bills, have other debts they simply can’t pay, or even a combination of the three. If this is the case, they may have heard about a debt settlement program on the TV or radio and wondered if it can help them.

The offer to get out of debt by paying pennies on the dollar might sound too good to be true, but in many cases it is not. Debt settlement is a safe, legal way for consumers to get out of debt quickly, particularly when working with a successful provider of services.

The benefits of debt settlement are straightforward: settlement companies can reduce debt by approximately 50 percent because professional negotiators work on behalf of consumers to negotiate with their lenders. The strategy typically reduces a consumer’s monthly payment substantially, and programs generally do not last longer than three to four years, so there is light at the end of the tunnel.

While debt settlement can damage a consumer’s credit score, particularly in the short-term, if the program helps a consumer avoid bankruptcy, that consumer may be much better off in the long term. In addition, after settlements are made, a consumer’s credit report is updated to indicate that the account has been resolved.

A good debt settlement plan, in addition to resolving a client’s debts, will also provide insight about how a client can avoid ever getting into the same difficult financial position. The key is for the consumer to become debt free and then remain so.

How Does The Debt settlement Process Work?

Whether you decide to enroll in a professional debt settlement program or negotiate settlements with your creditors on your own, the process is the same. The settlement company will require you to sign a limited power of attorney, so it can negotiate on your behalf. You’ll then need to set aside money to build up a settlement fund. Once you’ve saved enough to make a reasonable settlement offer, you or the professional debt negotiator will negotiate with the creditor for a reduced payoff amount, typically between 25% and 50% of the outstanding balance.

Once the creditor agrees to the settlement amount, you make payment and the account is paid off. (typically listed as settled-in-full, as opposed to paid-in-full, but is determined by the creditor). You then continue putting money into the settlement fund to accrue enough money for negotiating the next settlement. Basically, the process is a cycle of saving up and setting aside money, negotiating a settlement and paying the settlement.