If you are overburdened with debt and looking for a way out, then you may consider getting help from a debt settlement company. Such companies offer settlement programs, enrolling in which you can get rid of your bills/debts relatively quickly. Debt settlement is a process of negotiating with creditors so that they accept an amount lower than what is owed on the account(s). Read this article to get an overview of a settlement program and how it helps a debtor to solve his/her debt problems.
Which debts can you settle?
You will not be able to settle each and every debt you owe with the help of a settlement program. A settlement company can help you settle your unsecured debts such as, your credit card bills, unsecured personal loans, past due utility bills, medical bills, etc. However, you’ll not be able to settle your secured loans such as a car loan or a mortgage.
How does a debt settlement program function?
There are several settlement companies which offer debt settlement programs. However, it is advisable that you enroll with a settlement company which is reliable and has at least 3 years of relevant experience.
When you enroll in a settlement program, at first, the company will assess your financial condition to know how much you owe and what you earn every month. This assessment will help the company decide upon a monthly payment that you can afford and also give you an idea regarding how long it will take to repay your debts. Usually, an agent, on behalf of the company, will work with you. He/she will communicate with your creditors/collection agencies and explain that you will not be able to pay off the balances in full and negotiate to reduce the payoff amount. The agent will also ask you to stop paying your creditors for the time being and instead deposit the monthly amount into your settlement account. As soon as your creditors will agree to a reduced payoff amount, the accumulated settlement funds will be used to pay the creditors.
Thus, you will be able to get rid of your bills/debts quickly in a systematic way.
What are the benefits of a debt settlement program?
Here are some of the benefits offered by a debt settlement program.
* Your debt amount usually gets reduced – When you get help of a settlement program, the settlement company negotiates with your creditors to reduce the payoff amount to about 40-60% of what you owe to your creditors. Thus, it becomes easier for you to get rid of your bills fast.
* You have to make a single monthly payment – You need to make a single monthly payment when you enroll with a settlement company to solve your debt problems.
* Creditors/collection agencies may stop calling you – When you enroll with a settlement company, it informs your creditors and/or collection agencies that you are paying off debts with professional help. So, most of the creditors/collection agencies are likely to stop calling you for payments.
* You can avoid filing a bankruptcy – A debt settlement program helps you get rid of your debts and thus help you avoid filing a bankruptcy, which has a devastating effect on your credit report.
Though a settlement program helps you become debt free quickly, yet it has a negative effect on your credit report and your credit score may get lowered by several points. However, debt settlement is considered to be a better option than filing a bankruptcy, which stays in your credit report for about 10 years if you file a Chapter 7 Bankruptcy. So, settlement can be a better option for you when your financial condition doesn’t permit you to pay off the debts in full and the alternative is to filing a bankruptcy.
Jason Holmes is a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like Credit Score The Quintessential Therapy for a Happy Pocketâ, Take Creditors and Collection Agencies to Small Claims Court and, My Story- From Depression To a Smile.