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What is Debt Settlement

Are you deep in debt and do not know what to do? Debt settlement just might be the answer that you have been looking for. How does debt settlement work? In debt settlement, a person contacts their creditors, either directly or through a negotiator and tries to reduce the balance to get rid of their debt.

How can you get a debt settlement? The only way that your creditors will give you a debt settlement is if you have been struggling to pay your minimum monthly payments. You can make a debt settlement agreement by contacting your creditor, hiring a lawyer, or by using a debt settlement company.

Why would a creditor agree to a debt settlement? Most creditors know that people who are not paying their monthly bill payments are a risk of filing for bankruptcy. In a bankruptcy proceeding, people have their debts discharged so their creditors usually do not end up getting any money at all.

Does a debt settlement agreement show up on my credit report? A debt settlement agreement will show up on your credit report and it will lower your FICO score. Your FICO score is important if you want to ever get a loan, mortgage, or apply for an apartment; your FICO score tells lenders if you are a credit risk or not. The better the FICO score, the more likely you are to be able to secure credit.

How much can my debt be reduced by? Some creditors can reduce your total debt balance by fifty percent. However, most creditors only want to reduce the debt balance by thirty five to forty percent.

March 24, 2009

  1. Types of unsecured debt include: credit cards, personal loans, gas cards, department store cards, apartment lease judgements, medical bills, etc. Secured debt such as your home or car cannot be included in the program. However, if your car is repossessed or you foreclose on your home, our partners may be able to resolve what you still owe on those loans.
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