Debt Settlement is an alternative to bankruptcy which involves debt settlement companies negotiating with your creditors on your behalf, to eliminate some or all of your debt on an agreed settlement amount. They attempt to use various strategies in order to eliminate generally 30 to 60 percent of your debts.
If debt settlement is the solution for you, then throughout the process you will be making monthly deposits into a “settlement account” which will ultimately be used for your debt repayment. As funds begin to gather, the debt settlement company will begin to negotiate with your creditors, in which they will agree upon a settlement amount. Once an amount has been agreed upon, you will send that amount, directly from your settlement account, to your creditor. Once the payment has been made, your debt is considered paid in full, and you will no longer owe anything to that debt.
The debt settlement process generally takes between 24 and 36 months, depending on how much you are able to pay each month, and how well the debt settlement company that you choose can negotiate.
Benefits of a debt settlement
Debt settlement can be beneficial in various ways, including the following:
- it can help you pay off most or all of your debts;
- it helps stop creditor harassment, as the debt settlement company will usually contact your creditors to let them know that you are being represented. This helps to reduce creditor calls while you are focusing on repaying your debts.
- you may not have to repay all of your debt. When your settlement amount has been negotiated and you pay your creditor, that debt is gone.
Depending on your overall financial situation, debt settlement can be your solution for becoming debt free.