Mar 2010
4
There is currently a lot of controversy over whether or not debt settlement works as a debt elimination strategy. Many states are considering regulating debt settlement companies as a result of an increase in consumer complaints. Several other states have already taken action to limit the damage debt settlement companies can cause for unsuspecting consumers. If you are considering debt settlement as an option to get out of high interest debt, there are some things you should know before proceeding. Here we look at questions you should be asking before you decide if debt settlement is right for your situation.
What happens during the process?
Debt settlement, also referred to as debt negotiation occurs when you or a company hired to represent you, negotiates with creditors to reduce outstanding balances. Creditors are not required to negotiate, however if they believe your next option is filing for bankruptcy they may offer a lower pay off amount in order to recoup some of their money. Be forewarned, if your creditor is willing to negotiate your debt, you will more than likely be required to pay the full (reduced) pay off amount immediately or in some cases in two or three payments. Many people make the mistake of confusing debt settlement with debt consolidation or credit counseling. Each process is different, with debt settlement being the most drastic measure short of filing for bankruptcy. It is not a process which should be taken lightly.
Does it work?
The problem with debt settlement as a debt relief option is not necessarily the process itself, but rather the companies that provide services without fully explaining what the client is getting into. Yes, debt settlement can work but it is a risky process fraught with many unknowns. There is no guarantee that creditors will negotiate debt, nor a promise of how much you can save. With that being said, there are plenty of people who have negotiated with their creditors and saved thousands of dollars in the process. It is best to learn as much as possible about the process and any company that will be representing you, before moving forward.
Is debt settlement right for you?
It is important to understand that debt settlement is strong medicine for debt problems. Anyone who has the means to maintain their current payments or negotiate better terms is advised to do so while considering other options to reduce debt. If you are currently dealing with a severe and legitimate financial hardship that prevents you from keeping your account current, or if you are already behind in payments, debt settlement might be a process to consider to reduce your debt. It is imperative you understand the process, risks and negative consequences that may result from this method of debt elimination.
How to find the right company?
If, after careful consideration, you have decided this process is right for you, finding the right company is key to your success. There are hundreds of companies offering this service, however many of them are more interested in relieving you of your money instead of helping you fix your financial dilemma. Research potential companies carefully to find out if they have the experience, know-how and proven results to improve your chances of settling your debt. Check with the Better Business Bureau and other online sources to determine if previous clients have been well served. Do not rely solely on the information provided by the settlement company but pay close attention to what information they provide or in some cases fail to provide.
Debt settlement can be a viable option for the right person dealing with a situation that otherwise would result in bankruptcy. If successful, you could cut your debt in half, making it possible to be debt free in as little as three years. This can be accomplished through a company or on your own. Anyone considering this option should take the time to research all aspects of the process to determine if debt settlement can save you money.
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