What is Debt Settlement? Do You Need an Attorney for Debt Settlement?
If you are looking to get out of debt you have several options. Getting a basic understanding of those options as well as the pros and cons they offer is a good idea. In this post I’ll start by talking about the different options and then I’ll move on to looking specifically at what debt settlement is.
You basically have four options if you are in debt: To go on as before, credit counseling (also known as debt counseling), bankruptcy and debt settlement. Let’s look at them one at a time.
To go on as before
At least in theory it’s possible to just keep paying those minimum payments and pay of the loan the hard way, but since you are reading about debt settlement that might not be a practical option any more.
Credit counseling
Theoretically it’s a process of educating the consumer to help them avoid getting deeper into debt than they can handle. In the real world it’s more focused on establishing a plan for debt relief. And it may involve stuff like looking at spending habits, getting rid of credit cards and establishing a debt management plan with your creditors(getting one big loan with lower interest rates instead of many small). This is however not always enough to solve the financial difficulties of people in serious debt.
Bankruptcy
Is basically saying you are unable to pay your debts and is usually considered as a last resort because of the negative consequences, but none the less a valid option to consider if you are in serious debt. The advantage is you will be completely relieved of your debt, but there are a number of legal and social consequences.
Debt settlement
Is agreeing on and paying a onetime fee of between 40% and 60% of the outstanding debt and have the creditor forgive the rest. This of course is not something the creditors are interested in if they can get you to keep paying the minimum payments. So you are not likely to hear about this option from them and they usually won’t even negotiate before you are behind on the payments. On the other hand when you start falling behind they are more interested in a settlement than taking the risk of you declaring bankruptcy and not getting anything. If you settle your debt the debt will be removed from your credit report, but the late payments may remain. If you consider this option you should also consider if you need an attorney for debt settlement or if you want to do it yourself.
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