My Debt Relief Plan

Debt Settlement - Nothing but the Facts

September 13th, 2007

Bankruptcy filings have jumped nearly 17% during the month of August 2007. Unfortunately, this news is not surprising; after all, foreclosures are at an all-time high and credit card debt is skyrocketing. If youre in a situation where youre barely able to keep your head above water, you may be considering debt settlement. Read on for some very important information regarding this form of debt relief.

What is Debt Settlement?

Debt settlement is a process used by individuals (or professional firms representing those individuals) in which they negotiate with their creditors to pay their credit card debt in full for less than the balance (typically 50% or less).

Who Should Consider Debt Settlement?

If your debt is out of control, and youre losing sleep at night you may be a good candidate for debt settlement. This is especially true if you find yourself borrowing from one credit card to pay another.

Please keep in mind, however, if you should choose debt settlement you must have some type of funding available to pay your creditors when a negotiated settlement is reached. Many people have borrowed from friends and family, while others access a home equity line of credit or retirement fund. If you do not have access to funds from any of these sources there may be other options to accumulate the necessary funds to successfully pay any settlement agreements that might be reached with your creditors.

Does Debt Settlement Affect My Credit Score?

If youve managed to maintain a relatively decent credit score, it may be negatively impacted as a result of the process used to ultimately reach a settlement agreement with your creditors.

You see, creditors do not write off thousands of dollars worth of debt after simply receiving a telephone call from you explaining that youre flat-out broke; it simply doesnt work that way nor should it. Creditors wont even entertain the possibility of a negotiated settlement until an account is classified as delinquent.

Obviously, this delinquency may result in a reduced credit score. To learn more about debt settlement and your credit score, click here.

Will My Creditors Sue Me?

Litigation is certainly a possibility when credit accounts become delinquent, but that possibility is somewhat slim. You see, creditors would much prefer to resolve your past due accounts out of court, and avoid litigation altogether. That being said, please note that there are some cases where creditors do litigate to collect what is owed them.

How Long Does Debt Settlement Take?

If your accounts are current, debt settlement can take several months to complete. One of the most critical factors in determining how long youll be enrolled in this type of program, however, is your ability to generate funds so that negotiations may begin and your accounts can ultimately be settled.

If youre considering debt settlement and would like to learn more, please click here.

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Entry Filed under: Debt, Debt Relief, Settlements, Debt Reduction, Debt Consolidation, Blog Carnival