Why Debt Settlement Makes Sense in Specific Cases
Debt settlement is a strategy in which a debtor successfully negotiates to pay part of the amount owed to a creditor as a 100% clearance of their entire debt. Once your creditor has agreed, you only clear a proportion of the amount owed, and the balance is cancelled permanently. This option can work for you depending on the nature of your financial distress.
Below are examples of merits of debt settlement to overwhelmed debt consumers:
It’s Possible to Evade Bankruptcy
You may prefer debt settlements with a view to avoiding bankruptcy. While bankruptcy is a viable debt solution in certain cases, it’s a mark that will stay with you for the rest of your life. 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. If you lie, and the lender finds out you were once bankrupt, you may be accused of fraud. And you may lose a job for lying about it.
Done right, debt settlement can effectively help circumvent bankruptcy along with its possibly unfavorable outcomes. Your debt settlement is shown on your credit history for just 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.
Reprieve From Overwhelming Debt
When your inability to repay the money you owe creditors is genuine, you’ll find debt settlement to be relieving. The moment you’ve successfully negotiated and paid the settlement to creditors, it’s taken a relatively shorter time and smaller cost to achieve debt freedom than paying off as required under the original loan contract.
Another issue is that there many creditors who will prefer this approach 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. In case you’re filing Chapter 7 bankruptcy, the creditors have little hope of salvaging anything. The majority of such creditors will want to avoid this in case there’s a more viable way out, so they may accept your offer.
With a proper debt settlement arrangement, you can become debt-free in 4 or even 2 years. In other words, you can get your finances in order earlier, minus the obligation of monthly or other regular payments.
Debt settlement may be your legitimate key to financial freedom sooner. You only need to approach your creditors and negotiate terms that suit your current financial position and goals.