Debt Settlement

Keep in Mind the Considerable Options and Obligations

Debt settlement which is also known as debt arbitration, debt negotiation or credit settlement is an approach to reduce debts according to the agreement of both the debtor and the creditor where the debtor has to pay a reduced amount that will be regarded as payment in full. Generally debt settlement includes a process where the creditors agree to reduce overall debts in return for a lump sum payment from that the debtor has to pay. Many times a creditor may even agree to forgive a major percentage of total account balance. But one should remember that debt settlement is done only in case of unsecured debts, which include medical bills, credit card debts, pay day loans etc. The success of debt settlement majorly lies in a successful and efficient negotiation between the debtor and the creditor, which can be done either personally by the debtor himself, or with a help of a debt attorney on enrolling with a professional and reputed debt settlement company. Debt settlement makes perfect sense to reduce the debt pressure of the debtor along with the promise of paying back to the creditor, as the debtor finds the reduced amount of debt, that sometimes get waived off by more than 50% more manageable than court-mandated complications of bankruptcy which has its consequent negative effects; and the creditor too develops the hope of getting at least a certain share of his lent out money, which otherwise can get all lost in the ambiguous labyrinthine of bankruptcy.

As a matter of fact, a debt collection agency or junk debt buyers can agree to take less than the original creditors, as they had bought the debt for a fraction of the original balance. As a part of a successful negotiation process, the debtor can ask for that collection to be removed from the credit report, which generally does not happen with the original creditors. There are two ways that the debtor can choose from while negotiating with the creditors, either by negotiating with the creditors himself or by enrolling with a debt settlement company. Negotiating with the creditors personally has its own advantages as it lets you save the attorney and service fees that are chargeable by the debt settlement company and moreover handling the process yourself will let you have full control over your issues which further motivates the debtor to get debt free by self-help and confidence. However, hiring a professional company for this task is highly recommendable in case of obstinate creditors, as the expertise, experience, relationships and professional skills of the debt attorneys are put to use in order to achieve a successful debt settlement. Moreover an individual who is already neck deep in debts may lack a rational and controlled frame of mind that is needed to deal with the creditors in order to get advantageous settlement rates by their own.

Nevertheless, one should properly and sensibly consider the fallacies and obligations associated with debt settlement which may come in the form of various scams and traps in disguise of tempting offers, which worsens the debtor’s financial conditions. Apart from it, a debtor should also beware of the debt settlement companies which charges enormous amount of fees and hidden charges without much settlement benefits. One should take help of BBB website and FTC rules to find out more about legitimate and reputed companies. The other obligations which may follow a not-so-successful debt settlement are damages of credit report, possibility of lawsuits and negative tax consequences on the debtor. Thus a debtor must keep in mind various aspects which can either make or mar his financial future depending upon the consequences of debt settlement and successful negotiation with the creditors.

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