There are many debt settlement companies that try to tell you that they can help you get out of debt. However, is debt settlement for you? This is a very important question you must ask yourself and keep in mind while you research the subject.
You will want to be careful and really investigate the services of debt settlement companies. Some of them have hidden fees and charges that will only increase your debt to them. Understanding debt negotiation is also very important since this is what is done on your behalf by debt settlement companies.
So what exactly is debt settlement? The settlement of debt is a method of getting out of debt. Debt settlement is used when you get to a point where you cannot pay off all that you owe. A debt settlement firm will negotiate your debt on your behalf and try to reach an agreement with your creditors to lower the amount of money that you owe.
You may be wondering if you are a good candidate for debt settlement. It all depends on whether you can pay your debt through a credit counseling organization first. Debt management programs allow you to make one monthly payment to the actual counseling agency and in return they pay all of your creditors that have agreed to their terms. When this is the option you take, fees and interest rates are reduced, as well so your payments are more affordable. The difference is with debt management programs, you are required to pay back one hundred percent of your debt along with interest.
Debt settlement may be better for you than bankruptcy too. If you were to file for bankruptcy you would either eliminate most of your debt or all of your unsecured debt in a Chapter Seven bankruptcy plan. If you filed for a Chapter Thirteen plan then you would pay a portion of those debts back over a period of five years. With bankruptcy you get the legal protection of the court. This means that the companies you file bankruptcy with have no right to collect any more debt from you via mail, email or phone. Debt settlement does not give you this type of legal protection. You need to keep in mind that Chapter Seven bankruptcy may be very difficult to file for, and Chapter Thirteen requires you to pay the debt for the following five years and some of your assets may be relinquished.
Debt settlement is something you can do for yourself if you have only a few small amounts of debt. If you have a lot of debt with several different creditors, it is advised that you seek a debt settlement professional to help you. Debt settlement is difficult to understand and it may be hard to detect whether an offer that is being proposed is a good offer or not. Not to mention handling creditors and the stress that can be involved when they all are demanding they be paid at once. This type of pressure makes it difficult to make sense of the information and take the proper steps to find a good debt solution.
Debt settlement is something that is reserved for people that have fallen on hard times and cannot pay their bills any longer. If you are current on any and all of your payments then you will not be eligible for debt settlement. Negotiations are only for those that have no ability to pay their minimum payments. In order to settle, you have to stop paying any unsecured debts.
It is important to realize that credit card companies can look at your credit report at any time. So if they see you paying other debtors on time when you say you cannot pay them, they will not look highly on this action and will not settle on your debt. This does not apply to mortgages, car loans or other secured debt. Overall this type of action will look bad on your credit report and affect any settlements.