What Is Debt Settlement?
If you are experiencing financial problems then you may well feel as if your debts are spiraling out of control. Before you know it you may find that you can barely cope with servicing the minimum payments on loans and credit cards, for example, and your outgoings are such that you get further into debt every month just to make ends meet.
There are various options open to you when it comes to sorting out your debts. Some, such as bankruptcy, can be a fairly extreme measure to take that can have a range of negative effects on your life and your credit history in the future. Others, such as debt settlement, may offer an easier and less stressful solution.
Debt settlement is, in effect, basically a process whereby you (either on your own behalf or with the help of a debt settlement company) try to wipe out your debts by making a settlement payment towards them. You may not be able to pay these debts off in full but the company to whom you owe money may take a part payment as an alternative rather than see you default on your account completely later on down the line.
So, for example, you could work with a debt settlement company to settle a credit card bill with a lump sum payment. The debt settlement company will try and get the credit card provider to accept your lump sum as a one off settlement to clear the money that you owe.
In other cases some companies offer solutions where there is no lump sum available whereby you build up cash on a regular (i.e. monthly) basis to put together enough money to make up a viable settlement. The solutions on offer here will vary according to your financial circumstances and the company that you choose to deal with.
You can, of course, choose not to work with a settlement company here and do the job yourself. There is no reason why you cannot approach your creditor(s) direct if you want and try and work out a settlement deal with them. For most creditors this will be a better option than seeing you declare yourself bankrupt when they will have little chance of recovering any of their money.
It is important to realize here that this kind of debt settlement solution will not work with all debts. It tends to be most used for credit card debts, for example. It also comes with a range of potentially negative effects that you should think about before taking this route.
For example, debt settlement will show up on your credit rating which could have a negative effect on your future financial dealings. There may also be tax issues here in certain countries as some tax legislation views cancelled debts as taxable income.
As with any kind of debt management solution you are always advised to take considered and independent advice before you choose your best solution. This may well be debt settlement in the end but it is always a good idea to check out your other options first before you make a final decision.
There are various options open to you when it comes to sorting out your debts. Some, such as bankruptcy, can be a fairly extreme measure to take that can have a range of negative effects on your life and your credit history in the future. Others, such as debt settlement, may offer an easier and less stressful solution.
Debt settlement is, in effect, basically a process whereby you (either on your own behalf or with the help of a debt settlement company) try to wipe out your debts by making a settlement payment towards them. You may not be able to pay these debts off in full but the company to whom you owe money may take a part payment as an alternative rather than see you default on your account completely later on down the line.
So, for example, you could work with a debt settlement company to settle a credit card bill with a lump sum payment. The debt settlement company will try and get the credit card provider to accept your lump sum as a one off settlement to clear the money that you owe.
In other cases some companies offer solutions where there is no lump sum available whereby you build up cash on a regular (i.e. monthly) basis to put together enough money to make up a viable settlement. The solutions on offer here will vary according to your financial circumstances and the company that you choose to deal with.
You can, of course, choose not to work with a settlement company here and do the job yourself. There is no reason why you cannot approach your creditor(s) direct if you want and try and work out a settlement deal with them. For most creditors this will be a better option than seeing you declare yourself bankrupt when they will have little chance of recovering any of their money.
It is important to realize here that this kind of debt settlement solution will not work with all debts. It tends to be most used for credit card debts, for example. It also comes with a range of potentially negative effects that you should think about before taking this route.
For example, debt settlement will show up on your credit rating which could have a negative effect on your future financial dealings. There may also be tax issues here in certain countries as some tax legislation views cancelled debts as taxable income.
As with any kind of debt management solution you are always advised to take considered and independent advice before you choose your best solution. This may well be debt settlement in the end but it is always a good idea to check out your other options first before you make a final decision.
About the Author:
Frank Desaille helps people find out about structured settlement payments at his website on securing a structured settlement loan.
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