If you feel like you are drowning in a sea of debt and are having a hard time keeping up on your payments, debt settlement might be an option to help you get back on track. Debt settlement occurs when a creditor agrees to settle your debt for less than you owe. Once you make the agreed upon payment your account is considered to be paid in full or settled. It is often possible to negotiate the where you have to pay only forty to sixty percent of what you owe, or in some cases even less.
You can hire a debt settlement company to help you or you can contact your lenders on your own and attempt to do the negotiations yourself. Debt settlement companies do have the experience in dealing with debt settlements and also have established contacts with many creditors. These companies can often negotiate a debt settlement rather quickly.
If you choose to hire a debt settlement company to represent you, you will be required to sign a limited power of attorney. This gives the company the legal abiment with your creditors they will assist you in setting up an affordable payment plan. You will send a monthly payment to the debt settlement company and they will disburse money to your creditors according the settlement that has been reached. Once you have paid the full amount that was negotiated your debts will be considered paid in full. The entire settlement process can take anywhere from twelve to sixty months, depending on your level of debt and the amount of the payments you make each month.
You can also try to negotiate a debt settlement on your own. In this case you will need to contact each of your creditors and attempt to negotiate with them to reduce the amount you owe. You may be able to negotiate reductions on your own up to 60% of what you owe.
Whether you hire a debt settlement company to represent you or decide to negotiate on your own, keep in mind that your creditors benefit from the settlement as well. If you declare bankruptcy instead they could be left with nothing.
Debt settlements may be reported on your credit report as a settlement which is a negative mark. The other thing to keep in mind is that if you fail to meet the terms of the settlement, your creditor has the right to pursue legal action against you.