Debt Settlement: Why it May be a Good Option 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 […]
Debt Settlement: Why it May be a Good Option
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 strategy has many benefits based on the kind of financial situation a debtor is experiencing.
Below are examples of merits of debt settlement to overwhelmed debt consumers:
You May be Safe From Bankruptcy
You may prefer debt settlements with a view to avoiding bankruptcy. While bankruptcy is a viable debt solution in certain cases, it’s a mark that will stay with you for the rest of your life. 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. You could also be fired for not telling the truth.
If executed well, debt settlement is a reliable way for evading bankruptcy or having to face its consequences, which can be dire. After seven years, your credit report will stop revealing your debt settlement. Again, public records will not show you settling any debts anywhere, and after the credit report time limit for your settled accounts has elapsed, this issue is forgotten forever.
Reprieve From Overwhelming Debt
Settling your debts with creditors is a practical solution especially if you have valid explanation for not paying back your debts. 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 a lot of scenarios, creditors won’t squeeze a lot from you, including under a Chapter 13 bankruptcy filing, unlike what settling can offer them. And if you file Chapter 7 bankruptcy, the prospects for recovering anything are small. Such a scenario is never a first priority to many creditors, so if it’s possible to settle this differently, they’ll listen to offers.
When your debt settlement plan is great, you may clear the amount owed within 2-4 years. In other words, you can get your finances in order earlier, minus the obligation of monthly or other regular payments.
You may legally walk away from your debts by settling. Engage your creditors with a view to settling in a way that resolves your financial circumstances today and tomorrow.