Settle For A Lesser Amount

Debt settlement is the process of negotiating with your creditor to pay off (or settle) your unsecured debt at a reduced amount - often at a savings of 20 - 60% from your original balance. Other names for debt settlement include: debt negotiation, debt adjusting, and debt forgiveness. Taking advantage of this debt reduction strategy can be far less costly than consumer credit counseling and also provides an alternative to bankruptcy. Everyone has a different scenario, so find out, "Is Debt Settlement Your Best Option?"

Arming Yourself With Knowledge

Successfully settling your debts for less than what is owed will depend greatly on understanding the debt settlement process, determining your plan of attack, and establishing the correct negotiation posture and confidence.  

Before getting started with all of this, you may be asking yourself various questions. “Is debt settlement the route I should go”?  “What are the downsides vs. the benefits”?  “Where do I start”? The key is to educate yourself, and you will feel confident choosing and pursuing your best solution.

Don’t Ignore Your Creditors

By educating yourself on debt settlement you'll learn to take all the right steps. Most consumers are unsure or unaware of how to address delinquent debt and its compounding problems. Unfortunately, this just leads to more stress, more procrastination and eventually, a state of denial.  Usually, they end up ignoring the problem, hoping it will go away.

Not paying your debts at all can result in serious consequences. Ultimately, the creditor (or an assignee such as a collection agency) can, and probably will, sue you, take you to court, win a judgment, and garnish your wages.

Consider the FEES When Hiring a Debt Settlement Company

Debt settlement has grown into an industry with many upstart businesses offering such services to people with delinquent debt. Settling your own debts for less may seem too complex and even too intimidating for the average consumer to attempt on their own. The reality is that hiring a debt settlement company is not only unnecessary, but unwise. Throughout the section, "Hiring a Debt Settlement Company - The Fees," you'll learn about the various fees debt settlement companies charge for something you can easily accomplish yourself.

Consider the RISKS When Hiring a Debt Settlement Company

Indebtedness becomes scary when the monthly payments require more money than the amount flowing into your checking account. When creditors or collection agencies start calling, most consumers feel too financially incompetent to take control of their own situation and would feel more comfortable if a professional would just handle everything. Unfortunately, "professional" debt settlement companies do many unprofessional things and do not always have the consumer's best interest in mind. Read the section, "Hiring a Debt Settlement Company - The Risks" and you will understand why every consumer who needs to settle a debt, needs to settle it themselves.

The Debt Settlement Process

Most consumers find debt settlement much less intimidating once they understand its function. When the debt is 4-5 months old and the original creditor begins to wonder if they will receive any of their money, they become very negotiable and usually offer the consumer a settlement offer.

Prepare to fully engage yourself in the debt settlement process from the start of an account's first delinquency to the time you negotiate and pay a settlement on the debt. Successful debt settlement relies on timing, contacting creditors, planning a budget, and sticking to it. If you decide debt settlement is your best option, read about "The Debt Settlement Process" and learn about the steps you need to take when approaching your first delinquent debt.

The Pro's and Con's of Debt Settlement

Debt settlement may be an appropriate debt reduction strategy in certain situations and has some advantages; however, debt settlement has numerous disadvantages. Be sure to read, "The Pro's and Con's of Debt Settlement." You may want to consider a different debt reduction strategy.

The Do's and Don'ts of Debt Settlement

The average consumer can certainly grasp debt settlement and use it for their circumstances, but one wrong move in the debt settlement process can be costly. Reading "The Do's and Don'ts of Debt Settlement" will not only help you anticipate every step in the debt settlement process, but also help you avoid any common pitfalls.

Terms and Definitions

• Unsecured debts include medical bills, credit cards, personal loans, and bounced checks. With unsecured debts, there is no collateral "attached" to the loan to provide security as repayment. Unsecured loans are typically given to people with good credit. These are the type of debts that a creditor is willing to settle once the debt is delinquent, as they have no way to guarantee they will receive anything from you.
• Secured debts are secured by an asset such as a piece of real property such as an automobile or a home.  If the debtor can't finish making payments, and defaults on the loan, the asset securing the loan is sold and applied to the default balance. You will not be able to settle these debts, as the creditor will simply accept the colllateral property as the "settlement." This is also referred to as repossession.

Disclaimer: The information provided in this site is not legal advice. All information is general information, some of which pertains to legal issues involved in the subject matter. Credit Matters Inc. is not a law firm and is not a substitute for an attorney or law firm. Your access to and use of this site is subject to additional terms and conditions.

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