With debt settlement, an arrangement is negotiated between a debtor and their creditor, where the debtor repays a fraction of the amount owed as full satisfaction for their debt. As long as the creditor is satisfied, you only repay a percentage of what’s owed, with the rest of the debt being offset entirely. This option can work for you depending on the nature of your financial distress.
Here are some benefits debt settlement can provide to debtors in distress:
Bankruptcy May be Avoided
You may prefer debt settlements with a view to avoiding bankruptcy. Bankruptcy is capable of solving your financial woes depending on your situation, but it forms an indelible dot for as long as you live. Your credit report will have the bankruptcy filing for 10 years, but many of the times you apply for a loan or job, you may be asked whether you ever filed for bankruptcy. If your response is no, but the bank discovers later that you did file bankruptcy, charges of fraud may follow you. And you may lose a job for lying about it.
If executed well, debt settlement is a reliable way for evading bankruptcy or having to face its consequences, which can be dire. Debt settlement features on a consumer’s credit record for only seven years. Likewise, your debt settling won’t in public files, and the matter becomes water under the bridge when the time limit for credit reporting on the accounts in question runs out.
Reprieve From Overwhelming Debt
When your inability to repay the money you owe creditors is genuine, you’ll find debt settlement to be relieving. The moment you’ve successfully negotiated and paid the settlement to creditors, it’s taken a relatively shorter time and smaller cost to achieve debt freedom than paying off as required under the original loan contract.
Another issue is that there many creditors who will prefer this approach to bankruptcy. In many cases, the lenders won’t get much from their debtors even if the filing is under Chapter 13 bankruptcy, compared to the prospects of settling. In case you’re filing Chapter 7 bankruptcy, the creditors have little hope of salvaging anything. The people whom you owe money won’t let it come to this if there’s a better alternative, so they may want to settle.
When your debt settlement plan is great, you may clear the amount owed within 2-4 years. The major implications to you are the quicker restoration of financial stability, leaving behind the overwhelming regular debt repayments sooner.
Debt settlement may be your legitimate key to financial freedom sooner. You only need to approach your creditors and negotiate terms that suit your current financial position and goals.
