Debt Settlement Services Information

What is Debt Settlement?

Debt Settlement is the process where a debtor and a creditor agree on a debt repayment amount that is less than the original amount of debt. Debt settlement works only for unsecured debts, like credit card debt. For example, if you have a $20,000 credit card debt balance, and you can no longer make your payments, you could consider a debt settlement program. Rather than filing for bankruptcy, where your creditor would receive nothing, through debt settlement your creditor may accept a repayment of 50%. You could avoid bankruptcy due to the decreased debt balance, and your creditor would receive much more money than if you had filed bankruptcy.

Why Do Creditors Agree to a Debt Settlement?

Creditors must cut their losses. If you can no longer make payments, creditors traditionally turned to debt collection, or in extreme cases, filing a lawsuit. However debt collection and lawsuits are expensive. A creditor is not guaranteed a successful outcome, and the process is very negative. Not only will the creditor clash with the debtor, but the debtor will inform all of their friends and family about their treatment.

Debt Settlement works differently, because the process is initiated from the debtor. The creditor does not need to begin the ugly process of debt collection or filing a lawsuit. Creditors enter into a cooperative process with the debtors, and receive positive "they gave me a break" referrals. The creditors may actually keep more money than what they would earn through debt collection, and there is no risk in losing a lawsuit. For extreme cases where bankruptcy is a consideration, creditors walk away with considerably more money through debt settlement compared to bankruptcy.

How Can Debt Settlement Help You, the Debtor?

If your income to debt ratio is upside down, then something has to give. Traditionally, people have always turned to bankruptcy as their only means to reduce debt. But bankruptcy is very extreme and harsh, it can be tracked for up to 10 year, and it could even cost you your job. Bankruptcy is your worse-case scenario, and will prevent you from being able to borrow money in the future, such as a loan for a home or car. The first debt relief services for consumers came through the Credit Counseling agencies. The problem was that many credit counseling agencies actually were backed by credit card companies. Your credit rating was smeared, and the programs did not work very well, and many people still could not get out of debt. While regulation and industry pressure has improved the credit counseling process, it still does not actually reduce debt, rather it just adjusts your debt payment terms.

Debt settlement is the new-comer to the debt relief industry. Conceptually, it is a hybrid between bankruptcy and credit counseling. Similar to bankruptcy, debt settlement will significantly lower the amount of money you must repay to your creditors. However unlike bankruptcy, debt settlement does not impose a 10 year financial stigma. Unlike credit counseling, debt settlement actually reduces the amount of money that you must repay your creditors. Debt settlement provides many of the positive aspects of credit counseling and bankruptcy, with less severe drawbacks.

Where Can You Find Debt Settlement Help?

Debt Freedom Tips has done its homework, and we have found debt settlement providers who we feel offer a superior debt settlement service. These companies are all certified and accredited to perform debt settlement services. They all have trained and senior debt arbitrators on staff. They all are members of key consumer advocacy groups, such as a Chamber of Commerce, watchdog groups, or the BBB. Finally, we have interview each company, spoken with many of their clients, and have monitored their progress for many years. We are comfortable with providing these referrals to our web visitors seeking professional debt settlement help.

If you would like to receive a free debt settlement quote and consultation, form an approved Debt Settlement company, please visit our Debt Settlement Quote web page.