What is Debt Settlement?

What is a debt settlement? A debt settlement is an agreement that you make with a financial institution or other type of creditor in order to help you to pay off money that you owe to them.  Many people fall behind on payments or end up with financial difficulties that make it next to impossible for them to pay off large debts.  In many cases these are the result of credit card misuse and the high interest rates quickly pile up.  Before you know it you are behind on your payments, the interest keeps growing, you are receiving harassing phone calls, and your credit is being ruined.  At this point you may feel like bankruptcy is your only choice, and in some cases this can be true.  But if you only owe money to a single creditor then filing bankruptcy probably isn’t your best option.  Bankruptcy will damage your credit and should always be a last option when all others have failed.  So what other options do you have?

consulting on bankruptcyIn this type of situation your best option is actually a debt settlement.  What is a debt settlement? A debt settlement is an agreement that your creditor makes with you so that you can pay off your debt to them.  This agreement usually consists of paying off a lesser amount in a lump sum payment.  Why would a creditor accept less money than you actually owe? They do it because it’s better for them to get something instead of nothing.  With the fear that you will give up and file bankruptcy many companies are willing to take a partial loss instead of the total loss they would incur if you actually filed bankruptcy.  While this isn’t ideal for them, it’s better than risking getting nothing in return.

So how exactly do you go about negotiating a debt settlement? You could make an attempt yourself, but in the end this is something best left to the experts.  By hiring a professional to negotiate on your behalf you can take advantage of their experience and training in dealing with these types of situations.  While paying out more money when you are already in debt may seem like a bad idea, the truth is that it could save you a lot of money overall.  A professional lawyer can help to negotiate the best possible debt settlement for you.

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