Debt Settlement: Why it May be a Good Option
With debt settlement, an arrangement is negotiated between a debtor and their creditor, where the debtor repays a fraction of the amount owed as full satisfaction for their debt. Once your creditor has agreed, you only clear a proportion of the amount owed, and the balance is cancelled permanently. Many debtors find this approach advantageous in many ways depending on their specific financial circumstances.
Let’s take a look at some advantages of debt settlement to debtors in financial trouble:
You May be Safe From Bankruptcy
Circumventing bankruptcy may compel people to settle their debts. Bankruptcy is capable of solving your financial woes depending on your situation, but it forms an indelible dot for as long as you live. While your bankruptcy entry is removed from your credit report after 10 years, most applications for work or credit will require you state if you ever applied for bankruptcy. You may be considered guilty of fraud for denying that you once filed bankruptcy after your lender proves otherwise at some point. Likewise, your job is not secure if you’re caught lying.
When you settle debts with your creditors the right way, you won’t have to file bankruptcy or deal with its potentially devastating outcomes. Debt settlement features on a consumer’s credit record for only seven years. Still , no public database reveals your debt settling history, so once the credit report time bracket for the specific debt accounts has expired, you’ll never face the matter again.
Relief From Excessive Debt
If you have a legitimate reason for not being able to repay what you owe, then debt settlement is a viable way out. Once the settlement is paid as negotiated with your creditors, you become free of debt within a shorter duration and at lower costs compared to trying to pay off as per the initially agreed plan.
At the same time, many lenders won’t mind this strategy as opposed to bankruptcy. In many cases, the lenders won’t get much from their debtors even if the filing is under Chapter 13 bankruptcy, compared to the prospects of settling. And if you file Chapter 7 bankruptcy, the prospects for recovering anything are small. Such a scenario is never a first priority to many creditors, so if it’s possible to settle this differently, they’ll listen to offers.
It’s possible to settle your debt obligations in two to four years if you’re on a well-structured debt settlement program. In other words, you can get your finances in order earlier, minus the obligation of monthly or other regular payments.
Settling your debts could be the trigger of your financial liberty. You only need to approach your creditors and negotiate terms that suit your current financial position and goals.