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Debt Settlement

Debt settlement is a process where the debtors are given an opportunity to negotiate and reduce the outstanding debt by 40-60% of the amount they owe. The creditor forgives the remaining debt thereby helping the debtor to clear the debts faster.

Debt settlement companies offer a settlement program wherein they negotiate with either creditors or collection agencies to settle debts for less than what one owes. These companies charge an upfront fee for the services rendered. The debt settlement companies charge 25-35% of the debt balance that is forgiven. The fees are based on the total amount the debtor owes, the number of debt accounts and the amount that is saved by settlement. The program usually takes 2-4 years depending on the total debt amount.

The process works as follows: The debtors send monthly payments to the settlement company, which will deposit the funds into a trust account .Once enough funds are accumulated, debt settlement companies negotiate with either the creditors or the collection agencies and attempt to stop all collection efforts. Credit card debts, Medical bills, gas/store cards, personal loans etc can also be settled through the debt settlement process. Tax debts, alimony, child support, mortgages, car loans ,federally insured student loans and unsecured credit cards are excluded from the settlement program.

Advantages of Debt settlement

  • Helps to pay off debts faster
  • To avoid collection calls
  • To avoid bankruptcy of the debtor
The advantages of debt settlement are explained below :
  • To avoid bankruptcy : Debt settlements helps the debtor to reduce the debt burden and pay off bills comfortably. The debt settlement companies on behalf of the debtor negotiate with the either the creditors or collection agency (CA) and settle the debts as much as he can afford to pay. This avoids bankruptcy which at times may require the debtor to sell off his assets to meet the his outstanding debts.
  • Single paymen t: By debt settlement process the debtors can combine multiple bills and make a single payment.The advantages of debt settlement process is the debtor can avoid the stress of paying back the debts at several rates of interest and of dealing with several creditors at a time.
  • Avoid unfair collection practices : By opting for Debt settlement process the debtors can escape from the harassment of creditors and debt collectors.
  • Eliminate extra charges : The debt settlement company can try and eliminate late payment fees, if any.
  • Avoid lawsuit & other legal actions : In case when debts are outstanding the creditor or a collection agency can file a lawsuit or place lien on the debtors assets etc.The debtors by going in for debt settlement would be able to avoid such legal actions.