Debt Negotiation and Debt Settlement

Though media coverage of debt programs tends to lump them all together, there’s actually a great difference between debt settlement negotiations and the competing systems. The debt settlement plan is often compared, for example, to consumer credit counseling (even though settlement seeks to reduce total debt-load rather than just interest rates) and bankruptcy (though without the crippling effects upon credit reports and FICO scores), but much separates the superficially similar methods.

Essentially, the debt settlement company negotiates upon the borrowers’ behalf with creditors to reduce the overall debts in exchange for an agreement upon regular payments to be made. For the debtor, this makes obvious sense – they avoid the stigma and intrusive court-mandated controls of bankruptcy while still lowering, sometimes halving their debt balances. Whereas, for the creditor, they regain trust that the borrower intends to pay back what he can of the loans and not file bankruptcy (in which case, the creditor risks losing all monies owed).

There’s no guarantee, of course – all depends upon the specific borrower, their ability to repay obligations (or liability within lawsuit) based upon surrounding debt-load, past history of debtor and creditor, and the degree to which sudden financial hardships, whether unemployment or injury or divorce or disease or any sort of genuine emergency, have proven a restricted financial capacity. Successful negotiation can dramatically reduce debt balances, but all situations are different. The best suggestion’s to consult with a debt settlement professional to see if the program’s right for you.