Debt Settlement

This is the fourth in a series of posts regarding becoming debt free. We turn our attention again to debt resolution options. We will discuss another option available to debtors for becoming debt free.

In this and later posts, we will discuss the choices you have available to you to discharge your debt obligations and become debt free. That is the objective, freedom from debt.

• Pay Off Your Debt in Full
• Consumer Credit Counseling
• Debt Consolidation
• Debt Settlement
• Bankruptcy

Here we will discuss the fourth option. In other posts I will cover the other debt resolution possibilities.

Debt Settlement

If you have financial ability to pay your debts, this option is not for you. You should just pay your debts. I believe that if you have a valid debt and you have the means to pay that debt, then you have an obligation to pay it.

Debt Settlement or Debt Negotiation, may be appropriate for debtors with a serious amount of unsecured or credit card debt or who are looking at bankruptcy. Usually debtors who can benefit from debt settlement are struggling with overwhelming debt and experiencing a hardship that may makes it impossible to make the payments on time. Although it is possible for the debtor to handle debt settlement without assistance, typically, debtors use a debt settlement firm.

When debt settlement is used, an effort is made to negotiate with the creditors to reduce the debt and settle in full for a percentage of the amount owed. Using this method it is often possible to settle debts for 50% or less of the amount owed to these creditors. So if you owe $40,000 it may be possible to settle the debt with the creditor for $20,000 or less.

At the conclusion of the debt settlement process, the debt is satisfied and is considered paid in full even though only some fraction of the debt was actually paid. Thus if becoming debt free in 2-3 years sounds good to you, this may be a good option for you.

Everyone benefits. The creditor gets some of the money rather than none at all as in bankruptcy. The debtor gets debt relief when a debt is settled for a portion of the original.

If you think you might need professional debt settlement assistance, two reputable debt settlement firms are Debt Shield and Freedom Debt Relief. Call them and get a free consultation.

If you desire some help but wish to handle it yourself, you might want to consider a Do It Yourself product provided by NFAN.

Caution

A word of caution, if you negotiate a settlement on a debt without professional assistance never make a payment until you have the settlement offer in writing. In other words, if you have a $10,000 credit card debt and you negotiate and agree to pay $4,000, make certain you get that offer in writing from the creditor or collector and that it states the creditor/collector agrees to accept $4,000 as payment in full before you pay one cent.

Regardless of the option you choose, a debt elimination calendar and a simple family budget worksheet may be of some value to you.

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