What Is Debt Settlement?

Debt settlement is the process of negotiating with your creditors so that you are able to pay off a certain percentage of the debt amount that you owe. A debt settlement company will use different types of strategies to negotiate with your creditors so that you get the best outcome. Youll want to hire a debt settlement company that has arbitrators who are experienced and licensed so that they can negotiate a deal for you with your creditors. You can expect to lower the balances on the debt that you owe by anywhere from % to %. But how does the debt settlement process work? And why are creditors willing to negotiate with you so that your debt balance is reduced? The answer is simple: creditors know that if you end up declaring bankruptcy that they may not have any chance at all of seeing any of the debt that you owe repaid to them. Studies show that approximately % to % of all bankruptcies that are filed each year are current debt. Many people obtain more credit to pay off another creditor. After a period of time these people run out of credit to pay off their existing debt. And this is when many bankruptcies are filed. When people file a bankruptcy claim creditors dont get back any of the money that is owed to them. This means that a creditor is better off negotiating with the person who owes them money so that they can regain even a small portion of the total amount of the debt. Debt settlement companies will work with you and your creditors so that you can pay the minimum amount of money back to your creditor. A debt settlement company will allow a certain amount of time for the debt to be settled. A common time period is months and during this time the creditor needs to agree to on a total amount to negotiate on. Before you can use debt settlement to settle up your debts, youll need to qualify for the program. In order to see if you qualify or not, many debt settlement companies will require that you talk to a consultant about your personal debt. Together youll set up a financial program that will meet your needs. Youll be able to determine just how much money you need to put aside every month so that you can start to pay off your debt. Many times a debt settlement company will contact your creditors to let them know that they will now be your representative for the debt that you owe. This way you avoid the hassle of having your creditors continue to call you looking for payments. If you find yourself deep in debt you may want to consider debt settlement as a solution.