There are many ways of dealing with debt in case you are unable to repay it within the time period decided upon. While declaring bankruptcy is one way of dealing with the situation, it has a long-lasting impact on your financial life. The other option that you can look upon is debt settlement. For negotiating a debt settlement, you will have to get in touch with a debt settlement company. A debt settlement company works as a third party who negotiates with the creditor on your behalf.
Debt settlement means negotiating with the creditor to reduce the withstanding debt amount and pay the reduced amount at one go. Debt settlement works well both for the creditor and the debtor. Though the former forfeits the initially decided upon amount and settles for a lesser amount, he reduces the risk of not getting anything in case the debtor declares bankruptcy. The obvious benefit for the debtor is that he has to repay lesser amount to the creditor. It is important that the pros and cons are properly looked upon before reaching a decision.
The reason why many debtors go for debt settlement is because creditors forfeit a large amount and accept a marginal percentage as repayment. If you have a good debt settlement company working for you, the creditor may forfeit as much as 70 per cent of the outstanding debt. However, getting such a good deal only happens when negotiations are done properly and to your advantage.
Since you settle all debts, you can start afresh and manage your monthly budget and other essential expenses better. Settlement also helps you plan your debt relief in measurable goals in such a manner that you can repay it within the prescribed time.
If debt settlement is not properly negotiated, the disadvantages are more than the advantages. The biggest disadvantage of going for settlement is that it adversely reflects on your credit score. There is a vast difference between debt 'settled' and 'paid in full' and if the terms are not properly negotiated with the creditor, your credit score will be marred for a long time affecting your future investments.
The cost of engaging a third party firm is huge. While on the face it seems that you pay a reduced amount to the creditor, in reality you have to also pay the debt settlement firm which only adds to your expenses. Any firm will not carry on the negotiations on your behalf without charging an upfront fee from you. Additionally they will also charge you a monthly fee.
It takes anything between 24 to 48 months to settle all debts. During this period, you cannot directly pay your creditor. All payments will happen via the third party firm. Additionally debt settlement doesn't apply to unsecured loans such as car loans. Many states and many creditors prohibit third-party debt settlement too.
Thus before you decide on debt settlement, it is essential that you contact a legitimate company who has a reputation to boast off.
This post is shared by Attorneyforbankruptcy.com, which a leading law firm of California. Here you can have detailed information on
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