Debt Settlement Benefits: Interlude

When consumers with mounting debts get desperate, they often turn to what can seem like their last, best hope: debt settlement way.

These debt settlement companies are taking on an increasing number of clients as more consumers find themselves unable to pay their bills. Bankruptcy filings are up 30% over last year and many consumers have so much debt relative to their income that debt settlement companies decline to take them on as clients. Credit counselors, who focus on financial literacy and rehabilitation rather than negotiating lower payments, often work on those more severe cases.

How does debt settlement work?

Debt settlement involves negotiating with a creditor or creditors to pay off a percentage of your total debts at an agreed upon settlement amount. The debt settlement process usually takes between 12 to 36 months, so consumers can wait for creditors makes the sensible decision to agree and negotiate. Besides the obvious benefit of debt settlement, another benefit is the help with creditor harassment. Debt settlement companies normally contact all your creditors and inform them that you are working with a debt settlement company and that you are now being represented. This is very important in that it helps minimize or eliminate creditor calls. The standard practice is to direct all communication to the debt settlement company that you are working with. However, it is important to remain cognizant of the fact that original creditors can still contact you legally, but most will comply with such requests.

If a consumer files for bankruptcy, it is very likely that the creditor will receive nothing of the balance that is owed to them. Therefore, a creditor is better off negotiating with a debt settlement company. Most debt settlement companies work with customers that have legitimate financial problems and honestly need assistance. Here’s a previous post of mine tackling about on how to get out of debt before filing bankruptcy.