Why Debt Settlement Makes Sense in Specific Cases
With debt settlement, an arrangement is negotiated between a debtor and their creditor, where the debtor repays a fraction of the amount owed as full satisfaction for their debt. As long as the creditor is satisfied, you only repay a percentage of what’s owed, with the rest of the debt being offset entirely. 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:
Bankruptcy May be Avoided
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. Your credit record will stop bearing your bankruptcy information after 10 years, yet, you may have to indicate if you ever declared bankruptcy each time you seek a loan or employment. If you lie, and the lender finds out you were once bankrupt, you may be accused of fraud. Likewise, your job is not secure if you’re caught lying.
Done right, debt settlement can effectively help circumvent bankruptcy along with its possibly unfavorable outcomes. After seven years, your credit report will stop revealing your debt settlement. Again, public records will not show you settling any debts anywhere, and after the credit report time limit for your settled accounts has elapsed, this issue is forgotten forever.
Relief From Excessive Debt
Settling your debts with creditors is a practical solution especially if you have valid explanation for not paying back your debts. Once the settlement is paid as negotiated with your creditors, you become free of debt within a shorter duration and at lower costs compared to trying to pay off as per the initially agreed plan.
At the same time, many lenders won’t mind this strategy as opposed 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. But any bankruptcy filing under Chapter 7 diminishes the likelihood of creditors recouping something. The people whom you owe money won’t let it come to this if there’s a better alternative, so they may want to settle.
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. Engage your creditors with a view to settling in a way that resolves your financial circumstances today and tomorrow.