Debt Negotiation aka Debt Settlement, What It Is Not, Is It Right For Me?

     I recently read some grossly off the mark articles in ezinearticles.com and about.com on the topic of debt settlement also known as debt negotiation. Several of these articles suggested that debt negotiation is a bad thing. The point of these respective articles was that most debt negotiation programs do more harm than good and could end up costing you more money in the long run. In response to these widely off base articles, I am going to examine what debt settlement is not, and then what it is.

     • Debt settlement is not a get out of debt plan for folks who have good credit.
     • Nor is it for those folks who are able to pay their bills.
     • It is also not a program that tells you to stop paying your creditors

     The assumption sadly made in these articles was that debt settlement requires timely bill paying consumers with good credit histories and credit scores to stop paying their bills while at the same time begin paying a debt settlement company. This process would occur until there was enough money in the debt settlement company’s control to begin to payoff, the now delinquent, accounts one by one in some sort of settlement that was arranged by the settlement company. The other picture that these articles painted was that if you were paying your bills and then stopped that you would run the risk of getting sued by your creditor, have your wages garnished, or you would have to forfeit your property and assets to pay back your debt. Again, this picture was painted on a false canvass of having a good paying consumer with good credit scores all of a sudden stop paying their bills in preparation for a debt settlement company to come in and negotiate reduced payoff amounts.

     While it is true that your credit suffers when you stop paying your bills and it is also a possibility that your creditors would sue you to get their money back. It is not true that this is the result of legitimate debt settlement or negotiation efforts from a reputable professional debt settlement company. The authors of these articles could have pointed out that the horror of some folks has been getting sued and having their credit turn bad because they ended up working with a debt settlement company who did not know what they were doing. But the authors did not point this out.

•      Debt settlement is the process of paying off already bad debt. It is a legitimate way of recovering from financial crisis without a bankruptcy.

     A person in a debt settlement program only really has one way for their credit report and scores to go and that is up!

     Debt Negotiation is an option for you, instead of bankruptcy, if you are already experiencing serious financial difficulty in your life. If you have fallen behind on your unsecured debt payments (credit cards, personal loans, medical bills and repossessions), or you are already in collections and considering bankruptcy, you should evaluate debt negotiation as an option. As I already stated, debt negotiation is not a way to get out of paying your bills because you do not want to pay them anymore.  

     Further, debt negotiation is just what it sounds like: settling or negotiating with your creditors to pay them less than what you originally borrowed.  Typically you can expect to pay back 40-60 cents on the dollar. Why your creditors would take less is very simple: uncollected debt does affect your creditor’s bottom line. Something from you is better than nothing from you.

     Why you would want to settle your debt:

     • Filing a bankruptcy is more difficult than ever.  The bankruptcy laws have changed as of 2005;
     • you can restore your credit rating faster than a bankruptcy allowing you to get a car loan or a mortgage sooner at an affordable interest rate;
     • A collection judgment or bankruptcy filing impacts your credit report more dramatically and for longer periods of time than a settled account notation; in fact a debt negotiation program can have no negative impact on your credit report.
     • Debt negotiation is an honorable solution to settling your debts versus walking away from them.
     • You can even buy a home while you are in a debt negotiation program.  You definitely cannot get a reasonable mortgage while you are in certain parts of your bankruptcy.

     Should you settle your debt? Who knows, only you can answer this question for yourself? Should you use a debt settlement company to help you settle your debt if you are going to settle your debt? Again, who knows, only you can decide this for yourself? What I will offer you is that you should only consider debt settlement if you are already in collections or charge off status with your unsecured debt (i.e. credit cards, repossession balance if you no longer possess the car, etc.). 

     Here are some reasons to consider why you would use a debt negotiation company:

     • Creditor harassment calls will stop once the negotiation company sends out cease and desist letters to your creditors letting them know that you have retained an attorney to represent you;
     • Experienced attorneys know what the rules of debt collection are and will not be swayed by fear and intimidation tactics;
     • keeping your assets with a law firm will keep your assets out of reach to your creditors;
     • You can save yourself a lot of money.  Typically you can pay off your all your debts for 40-60 cents on the dollar. This would include all of your fees as well.  From this standpoint it doesn’t make sense to do it yourself.
     • You can be debt free in 36 months or less.  It can take you 30 years to pay off a credit card making minimum payments.

     Start a debt negotiation program, or talk to a debt negotiation specialist for a no hassle debt review

     If you have good credit and are making your payments to your creditors, then debt settlement is not an option for you in my opinion. Here are some articles with suggested ways to save money (have more money to pay off your debt):

Debt Negotiation        Debt Consolidation