FAQs: Debt Settlement Programs

How Does Debt Settlement Work?

Debt Settlement FAQ
Debt Settlement FAQ

If you are looking for debt relief help, a debt settlement program may benefit you. In a debt settlement or debt reduction program, your debt is negotiated with the creditor. This allows you to pay a reduced amount on your debt or pay it off in one lump sum. If you have a large amount of debt, for instance more debt than you can realistically pay off in a two to three year time frame, you may need debt help.

What Does Debt Consolidation Resolve?

If you are falling behind on your monthly payments, debt settlement may be for you. It is different from debt consolidation where debts are combined to be paid down at a lower monthly rate to make your payments more feasible.

Why Would a Creditor Agree to Settle My Debt?

Creditors benefit from debt settlement because they know if they do not negotiate your debt you may end up filing for bankruptcy; a situation where they would likely get nothing for your debt. In these cases it is better for the creditor to settle and get some repayment of the debt rather than none.

How Will Debt Settlement Change My Credit Score?

In order to qualify for debt reduction help in the form of a debt settlement agreement you must already be behind on your payments which would have already negatively affected your credit score. In most situations, the damage has already been done. What you choose to do with your debt now that you are behind can impact your credit rating for the better or worse.  Being part of a debt settlement program will help you settle your debts which will eventually improve your credit score.

Why Not Just File for Bankruptcy?

Since the bankruptcy reform in 2005, it has become more difficult for many debtors to qualify for 100 percent forgiveness of their debts. Bankruptcy can also have a very negative impact on your credit score and is a legal proceeding which can be intimidating to many.  In some bankruptcies debtors are required to surrender their assets and make payments over several years to a bankruptcy trustee. Before making a decision to file for bankruptcy it is important to speak with a qualified attorney.

Do I Need a Firm to Help Settle My Debts?

If you have several accounts, owe more than $10,000 total, or just are not sure how to go about settling your debts, it is recommended that you hire a debt settlement company such as to help. Debt settlement companies have the experience and expertise to know how to get your accounts settled as quickly as possible for as little as possible. You will most likely be more successful in settling your debts if you use a professional firm.

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