Debt Settlement
What is it?
When a debt is incurred by an individual, and circumstances dictate that they are unable to fulfill the entirety of the debt, the creditor will agree to take a percentage of what is owed to satisfy the debt for both parties. The negotiation for a debt settlement can be done by either the debtor, or by a 3rd party employed by the debtor to speak on their behalf. The percentage of what a debt can be settled is dependent on the type of debt (secured debts cannot be settled because there is a tangible property tied to the debt), and the creditor who the debt is with. Percentages can range from 15%-85% sometimes lower, sometimes higher.
The Process
A debt settlement company will work with you to plan a monthly payment schedule that will fit within your budget, and will develop a timeline of when they expect to eliminate your debt. If you haven't already stopped paying your creditor's, you will make the decision to stop paying them and deposit an agreed upon amount into a personal savings account; once you have saved enough funds, the debt settlement company will begin negotiating with your creditor's to accept a reduced amount of debt as your payment in full. It is important to understand, if you choose debt settlement, all of your accounts will fall behind and eventually charge off. Once your accounts are settled, the creditor will report the account settled with a $0 balance, and you will no longer be liable for any forgiven amounts. Keep in mind, that whenever you decide to settle your debts, there is always the possibility that you will be sued by your creditors. The final outcome differs from person to person. Your “hardship”, or the reason to consolidate, will determine your settlement.
When you deal with Financial Choice Network, you will be directed to a reputable company that will normally base your payment on a 50% settlement plus any fees they may charge. If you deposit your funds into your settlement account consistently, it is reasonable to assume you will be debt free at the end of your program. The length of most debt settlement programs is 36 months.
Since the debt settlement company does not manage your money for you, they do not have to report to the credit bureaus. No one will know that you are using a debt settlement agency except you and your creditors.
While debt settlement initially will have a negative impact on your credit, it will also save you the most money over time compared to other methods of consolidation. It is the quickest route to becoming debt free.
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