Debt settlement has turned into one of the popular options for those suffering from bad credit or no money problem. Till now, this unique solution has been tried and tested by many and it won’t be wrong to say, “it is offered positive results.” In short, who doesn’t want reduction in debt amount?
Besides, who would say no to 40-50 percent reduction! Would you? However, like any other process, it also comes with certain terms and conditions. Well! It has worked for many, so it may work for you too. Here is a short description on “how it works.” Raise your knowledge and discover a great solution to biggest debt problem.
Debt Settlement: Who Can Apply?
You are way behind from your payment schedule, and seriously planning to show yourself bankrupt- the ultimate way to get life back on track. The term, Bankruptcy itself is thought to be the nuclear option. Not because of its benefits, but due to the mark that stays on the debtor’s credit history for about 7-10 years, which is not favorable at all. In the same way debt settlement agreement is not for those, who are behind on a paying debt just by a few days and can manage. It’s for debtors stuck in tight spot and seeking an option but bankruptcy.
It’s believed that opting a debt settlement process would help you save upto 40-60% of your debts, while approximate cost on total debts is 15% of the amount. Different debt settlement companies many have different rules and condition. Here is a brief description of its working process.
Debt Settlement Procedure:
• The Setup: While working with a company offering debt settlement company, you stop paying the creditors/company and start putting money into a trust account of the creditor or debt settlement company. The payment is further divided, from with a part goes towards fees, while other goes in an account to be used to forfeit the creditors after open negotiation.
• The Waiting Period: Missed payments start appearing on the debtor’s credit history, his/her credit score declines. As a result creditors/companies start calling you. The creditors generally write off debts, which are late over 180 days, with every day passing by, they turn out more anxious than before.
Along with waiting for the creditors/companies to get concerned, you need to linger for the trust fund’s amount to soar high enough to make payments on the negotiated debts.
• Negotiation / Collections: Some time, the creditor or the company sells the debt to agencies or firms for less than the actual debt amount. This is where, at some point the negotiation start getting complicated. For instance:
You owe $1,000, and the creditor/company is aware while the upcoming situation. The creditor decides to sell the debt for $200 to a collection company, while bearing a loss of $800 on the debt. But, when the negotiator put a proposal of $500, the creditor will certainly seal the deal. If the collection agency settles in $ 700 with the debtor, that means they made money out of bad debt.