Before You Agree To A Debt Settlement…

As more families find themselves struggling financially, an increasing number of people are making a conscious effort to reduce the amount of debt they have.  Some try it on their own, while others turn to a debt settlement company to help them negotiate a lower payoff balance with their creditors.

Debt settlement is the process companies use to negotiate a pay off amount that is lower than the total amount owed.  Some debt settlements have given individuals the opportunity to pay as little as 50% of what they owe to consider the account paid in full.  If you are considering debt settlement, you should already be in a situation where you can’t keep up with your debt because it does do some damage to your credit score.  Debt settlement is not a good option for individuals who can keep up with their debts.

If you have more than $10,000 in credit card debt and you can’t even keep up with your minimum monthly payments, debt settlement is one possible option that helps you avoid bankruptcy.  But is it the best course of action?

Debt Settlement Negotiations

What some people don’t realize is that just because you enroll with a debt settlement company it doesn’t mean that all of your creditors will automatically agree to settle your debts.  There are a number of issues that improve or hinder your ability to realize a successful settlement, including:

If you have been unemployed or recently became disabled and unable to work, you’ll have a good chance at getting approved for a debt settlement because it is obvious to the creditor that you will have a hard time making payments with the reduced or lack of income.

Maxing out your credit card immediately before attempting to settle, and then not making any payments will make it look as if you made those purchases with the intention of not paying for it.  A creditor will be less likely to settle your debt with you if you do this.

Because you cannot file bankruptcy more than once every 7 years, if you have already filed a bankruptcy within the last 7 years a creditor will be less likely to settle with you.  Debt settlement is usually something creditors will agree to when they believe there is a good chance their debtor is going to file bankruptcy.  With a settlement, at least they know they’ll get some money out of you where as in a bankruptcy they may not get any.