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Debt Settlement May Not Be The Best Option For You

On Behalf of | May 23, 2018 | Debt Settlement

As you consider the best ways to manage your outstanding debt, you may have certain options that you have ranked above others. While you still may feel hesitant about seeking any type of debt relief, you may be at the point where you know that your remaining liabilities will only continue to get worse if you do not take serious action.

While you certainly should explore the various relief options available, you may want to ensure that you gain the right information regarding each avenue. For instance, if you are considering debt settlement, it may benefit you to understand that this option does not suit everyone’s needs.

What is debt settlement?

You may already know that when it comes to settling in relation to any type of financial situation, one party typically agrees to obtain a lesser amount of money than owed in order to end a conflict. In cases of debt settlement, the idea is to come to a settlement with creditors to pay less than the full outstanding balances. Because it can take a considerable amount of time and effort to negotiate with creditors for any type of settlement, most people hire debt settlement professionals to handle the negotiations.

Is debt settlement effective?

Debt settlement could act as a useful option for some individuals. However, working with a debt settlement company does not guarantee that your creditors will negotiate. Some creditors may have policies indicating that they do not work with these companies.

Additionally, even with successful negotiations for a lower payment, you could still end up responsible for 65 to 80 percent of your original balances. As a result, your remaining payments could still be considerably high, and you may not have the ability to meet those payments either. This issue could mean that you cannot successfully complete your debt settlement program. You could also end up facing lawsuits from creditors who would rather sue for payment than settle.

Should you consider bankruptcy as a debt settlement alternative?

If debt settlement does not sound like it could work in your best interests, you do have other options. Depending on the situation, Chapter 7 bankruptcy might act as a more comprehensive way to address your outstanding debts through liquidation, especially if you do not have the means to work with a repayment plan. Bankruptcy does not address every type of debt, such as unpaid child support, but filing could help stop lawsuits and other actions that may have been taken against you while also allowing you to discharge permitted liabilities.