Feb 12
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A debt settlement company is a business that helps you lower your debts by negotiating with creditors for reduced one-time payments. These companies can help you find a way out of debts you can no longer afford.
Settlements have never been more attractive than it is now. The economy is stagnant, and more and more people can’t repay their debts in full but are determined to stay out of bankruptcy. And debt, like anything else in the financial world, is up for negotiation as never before.
Debt settlement is similar to any business negotiation, in that the parties have both opposing interests and matching interests, and a third party — in this case a debt settlement company — can help reach compromise and avoid an outcome neither party wants. Here that outcome is bankruptcy.
For example, in a typical situation, you can’t or don’t want to pay the full amount of your debt, while your creditor hopes for full payment. At the same time, if you can’t pay and the creditor won’t release you from the debt, you may be forced to file for bankruptcy, destroying your credit and returning little or nothing to the creditor.
A compromise worked out by a debt settlement company, on the other hand, could save both parties that ending. Each side could agree to a settlement in which you pay back what you can afford. That way, the creditor gets back more than it would in bankruptcy court. This strategy works best when the consumer can save up enough money to pay a substantial portion of each debt — usually 40 to 60 percent — in a single lump sum.
The key to picking the right company is knowing how the process works. Here’s an outline of how a typical settlement negotiation operates:
Once you hire the services of a debt settlement company, you’ll stop making monthly payments to creditors. Instead, these payments will be made directly from your bank account into a trust account.
The money compiled in the trust fund is used to build up lump-sum payments for your creditors and as leverage to convince them to negotiate. Creditors won’t negotiate with you as long as you’re making minimum monthly payments.
There has never been a better time for debt settlement. Creditors are more willing to negotiate these days than ever before. They have little interest in seeing consumers’ debt swallowed in Chapter 7 bankruptcy proceedings, so they’re often willing to take less than they’re owed on the assumption that the only realistic alternative is even less.
There are rules in place to make sure every consumer who uses a settlement company is protected from fraud and abuse. The Federal Trade Commission requires that settlement companies disclose the risks of debt negotiations and prohibits up-front fees.
Some consumers try to negotiate debt settlements by themselves, but they typically find themselves at a distinct disadvantage. They have little bargaining power on their own, and they’re not equipped to manage their way through the bureaucracy and red tape presented by their creditors.
Debt settlement companies, on the other hand, have the advantage of being in regular contact with creditors. This means an easier time negotiating better settlement rates, and faster. It also means consumers have an intermediary to help deal with calls and letters from creditors and collection agencies.
There is evidence that debt settlement, if its’ done right, can improve the standing of consumers, and there’s no better time to do it than now. If you decide to negotiate your debts, you should strongly consider hiring a professional debt settlement company.
David Lindell is a debt negotiator with http://www.edebtsettlementcompany.com/. He works directly with all major creditors on behalf of his clients. All settlements are presented without any up-front fees. His debt settlement company offers free debt and financial hardship analysis for anyone considering debt settlement.
