Subhan Tariq, Esq
Debt settlement is one way to get out from under the burden of debts. If you are facing a financial downfall and can’t afford to pay the whole amount owed, then you would want to consider debt settlement. It is the act of negotiating with the creditor and offering him to pay the money owed in a lump sum in exchange for the unsecured debt being reduced or forgiven. Debt settlement works only for unsecured debts, which are not backed by any collateral, that includes credit cards, medical bills, etc.
Debt settlement resolves your past due debts for far less than the full balance and at the same time saves you from bankruptcy. The question which arises is why the creditor would want to settle for less. Well, the creditor would want to gain something instead of nothing at all before the debtor opts for the last resort, bankruptcy, in which most types of debts are removed. Unfortunately, debt settlement is most likely to harm your credit report and stains your report for up to 7 years. In addition, it takes years to negotiate and finally resolve with the creditor.
The process is not as quick as you think. Yet, debt settlement might be a better option for you because the sooner you get rid of the debts, the better. As late payments may have worse impacts of being there for longer and have chances of being sued. Bankruptcy as well remains on your report for 10 years. One most important thing to remember is that the creditors are not bound to accept your offer to resolve the debt for less. Therefore, there is no guarantee that you will be allowed a debt settlement by the creditor. In that case, there are other alternative solutions you can consider but before you do any of that it is best for you to consult a professional.