Debt Settlement Facts

Searching for accurate debt settlement facts among all the noise on the internet can be a difficult process when all you want to do is understand debt settlement.

There tends to be quite a bit of confusion about what exactly debt settlement is, how the process really works, and what your rights are as you attempt to settle a debt. Smart Debt Repair will set the record straight right here by outlining some of the key facts related to debt settlement.

What is Debt Settlement?

Let's first define it. Debt settlement is the act of settling a debt by paying an agreed sum which is less than the actual amount of the debt. Both sides, debtor and creditor, must agree on this amount in order for the process to go ahead.

Debt settlement is not a way to completely avoid paying the money you owe. It simply doesn't work that way. You will have to come up with an offer that the creditor will be willing to accept and you are able to pay.

Usually debt settlements are paid in one large lump sum payment. Or at the very least you will have to prove to your creditor that you have access to the agreed upon sum before they would be willing to put a settlement agreement in place.

Essential Debt Settlement Facts

Here is an essential debt settlement fact you should be aware of. A creditor will almost never accept a debt settlement offer from you if you are still making monthly minimum payments on your debt. It will only be after you reach a point where you can't possibly keep up with minimum payments that your creditor will consider settling your debt for less than the full amount.

This is because they know that if you're not in a position to make at least minimum payments you may well be in danger of defaulting on the loan or even declaring bankruptcy. In that case, the creditor may assume that taking a partial payment of the debt is better. They would rather not sit by while you default or declare bankruptcy and end up getting nothing paid on the debt from you.

Is Debt Settlement Right For You?

So far you may be thinking that debt settlement could be an excellent potential solution to your debt problems and it may well be, however it does come with a price. Going through the debt settlement process can have a damaging effect on your credit score, making it much more difficult for you to borrow money in the future. This can have far-reaching consequences if you have plans to undertake any projects require financing, such as buying a house or starting a business.

Do It Yourself?

There are two main ways people start the debt settlement process. One is to take matters into your own hands and write a letter to your creditor, making them an initial offer, to settle the debt. If you do this, don't expect your first offer to be accepted as is, it may or may not. More than likely you’ll be in for a couple rounds of negotiation in back and forth letters before anything gets agreed upon, so be prepared for that likelihood.

Or Outsource It?

The other way to tackle the process is to commission a debt reduction attorney or debt settlement company to handle the process for you. This may result in a better deal for you on the final agreed upon debt payoff amount, but will also entail fees which may make the final results less desirable than if you tried to negotiate the debt yourself.

Be very careful to check the credentials of any debt settlement company you hire to ensure they are legitimate. Your best bet is never to pay any fees until the debt has been settled.

Make sure you always get a debt settlement agreement in writing. It needs to be signed by your creditor and by you. That way if things go sour or you think you've been treated unfairly, you will have some recourse. Verbal agreements don't count for much in front of a judge, so keep copies of all correspondence and important documents.