If you are highly immersed in debt and are not able to repay it back, you can go for a debt settlement program which allows you to repay only a portion of your outstanding debt to the creditors. Under debt settlement plans, you can negotiate with your creditors to bring down your debt to 40 to 60% of your outstanding amount and the creditor agrees to forgive you the remaining part of the debt. The most common debt that is generally settled under debt settlement program is the credit card debt. You can also settle auto loans, medical bills and personal loans under the settlement program. However, certain types of loans such as alimony and child support obligations, mortgages, car loans and federal tax debts cannot be settled under debt settlement plans.
It usually takes 2 to 4 years to pay off the debts using the debt settlement program. There are debt settlement companies who negotiate with the creditors or the collection agencies on your behalf and settle the debt for much less that you actually owe. The companies normally charge an upfront fee for their service. Debt settlement has the following benefits:
- Debt settlement can help you to avoid bankruptcy, because under such program, you not only save money by paying only a small portion of the debt, but also repay it back in monthly installments. So there is a very little chance that you cannot continue making your payments and file bankruptcy.
- Under debt settlement program you make only a single payment to the debt settlement company for all your debts you would like to settle. The debt settlement company accumulates this money in a trust and after accruing a good amount they negotiate with your creditors and pay them off.
- Registering for debt settlement program will help you to avoid the unfair collection practices adopted by most creditors and collection agencies. Moreover, the debt settlement company also negotiates on your behalf and helps you to eliminate the late payment fees and other finance charges associated with the debts.
- You may also avoid judgment which can be brought against you by the creditor or the collection agency in order to recover the debt. This may save you from getting your wage garnished or placing your property on lien.