The Truth about Debt Settlement

Debt settlement can be an invaluable tool to getting out of debt that few people know to take advantage of. It is common practice for creditors to accept less than they are owed; however, there are some pitfalls to this practice and it’s important that you know the pros and cons of a debt settlement or debt negotiation program.

How Debt Settlement works or Debt Negotiation works.

Mary has $60,000.00 of unsecured credit card debt that is owed to four different banks. Let’s call the banks W, X, Y, and Z. The minimum payment of a $60,000 debt is about $1500.00 a month; roughly the equivalent of a small second mortgage. Times are tough; Mary can no longer afford to make the minimum payments, and has in fact missed a couple payments, causing her to begin receiving collections calls from Y and Z.

Mary has already stopped paying her creditor’s and her credit score has already started to take a negative hit. Mary makes the decision to enter into a debt settlement or debt negotiation program. The debt settlement company puts her on a repayment plan of $900.00 a month that will include the cost for the program and her settlement fees; this is normally a 36 month program. Mary is now forwarding any collection calls to the debt settlement company, restoring peace to Mary’s home. A period of time goes by during which Mary has accumulated money into a trust account with her debt settlement company. As the money accumulates, the debt settlement company is negotiating possible settlement offers from the creditors. Once an offer is accepted by Mary and the debt settlement company, the bank which is holding Mary’s funds, wires the money over to the creditor, ending the debt. This will now read “paid in full” on her credit report. The process is repeated with all banks until the process is complete and Mary is out of debt.

Upon completing her debt settlement or debt negotiation program, Mary not only finds herself out of debt, but she did it without having to resort to bankruptcy. Debt settlement or debt negotiation isn’t for everyone. But for those individuals who find themselves in between not being able to make their payments, and not wanting to file for bankruptcy, debt settlement or debt negotiation can be an appealing, viable option.

When making these decisions it’s important to have direction. Financial Choice Network is committed to connecting you to the right provider! For a free consultation, call or fill out the form and get back on the road to financial freedom.