What is debt settlement?
Debt settlement is an agreement between the creditor and the borrower for
a lump sum with a reduced repayment amount to take the place of a full
repayment. This is often negotiated with the help of a debt settlement
company that takes a financial portion of the repayment. The debt settlement
company will put payments in a savings account, which will grow until
large enough to negotiate with the creditor.
Major areas that benefit from debt settlement include medical bills, credit
card debt, utility bills, and personal loans. Student loan debt, mortgages,
or auto loans cannot usually be settled.
Before undergoing a debt settlement make sure you meet with a bankruptcy
attorney that can provide you with your options under the law. Contact
us for a free consultation to decide whether debt settlement is in your
best interest and your legal rights as you move forward in the process.
Should I try to settle my debt?
Debt settlement seems appealing to many due to the potential to pay back
a smaller amount than what is originally owed. Debt settlement companies
will usually charge fees before settling debt.
Negative consequences from debt settlement include:
- Credit damage due to halted payment directly to creditors
- Lawsuits from the creditor related to debts unable to be settled
- Continued interests and fees on other debts outside the ones settled
- Tax consequences because any savings from the settlement are considered taxable
- Inability to pay monthly installments to the debt settlement company
- Lien placed on the borrower's home
If you are seeking to undergo a debt settlement, or are in the process
of debt settlement, you need an experienced lawyer by your side to make
sure that you do not fall into bankruptcy.
Give our firm a call today and let us help manage the debt settlement process.