Debt settlement is a method of reducing the debtor’s debt to an amount that is agreed upon by both the creditor and the debtor. The reduced amount is then regarded as the full payment of the debt. Debt settlement has protected many people from being declared bankrupt. As such, it is a good method of settling financial obligations.
How should you go about it?
So as to start off the debt settlement process, you should get in touch with your creditor. There are creditors that have the habit of sending settlement offers after certain periods; other creditors however, usually wait for the debtors to contact them first. After your creditor has accepted to settle for a lesser amount, he/she will send you the bill that contains the final settlement total. The final settlement total is required to be paid in full.
Why do creditors accept to settle?
The reason as to why most creditors accept to settle is because they usually have the fear that the debtors will file for bankruptcy. The result of a debtor filing for bankruptcy is the fact that the creditor could end up getting nothing especially in instances where they are not preferred creditors.
What are the advantages and disadvantages of debt settlement?
The advantage of settling is the fact that the debtors get to pay less than they ought to pay. And creditors do not get to lose their entire amount to such debtors. The disadvantage of debt settlement however, is the fact that the debtor is usually required to pay the settlement amount in full. Therefore, a debtor has to make sure that they have the settlement amount with them or the entire settlement deal will fail.
Debt settlement is a good way of dealing with debts that have been owed for long periods of time. This option of dealing with debts is a good one as both the debtors and creditors benefit. Before a debtor decides to settle a debt, he/she should ensure that they are capable of fulfilling their end of the bargain.