If you get into serious debt and have trouble making your payments every month, you may need to seriously consider debt settlement. Debt settlement is a process where you negotiate with your creditors to get them to accept less than they are actually owed. There are two ways that you can do debt settlement: you can negotiate on your own or you can work with a debt settlement firm. Both avenues have pros and cons.
Doing debt settlement on your own
Doing your own debt settlement plan can be simple or complex, depending on how many different debts you have from which you need relief. If your debt problem is mostly due to credit card debt, your debt settlement efforts will involve calling these companies to ask for relief. The easiest way to do this is to try to get your credit card company to drop late fees and other penalty fees in exchange for payment of your debt. You might also be able to negotiate away some of your interest costs in exchange for payment.
Using a debt settlement firm
Negotiating on your own can be a lot of work and since you aren`t an expert, you may not be aware of tried-and-true techniques that work. A better option may be working with a firm that specializes in debt settlement. These firms will negotiate a settlement on your behalf, typically anywhere from 40 to 60 percent of what you owe.
Pros of debt settlement
Of course, the biggest advantage to settling your debt is that you are able to pay less and get out from under your crushing debt load. Another advantage is that you get a fresh start and a chance to avoid making the same mistake again. A third advantage is that you avoid filing for bankruptcy, which can often be the next step if you can`t get your debt settled. Another potential advantage that you might make as a condition of your repayment is that the creditor has to remove negative items from your credit report.
Cons of debt settlement
The disadvantages of debt settlement make for a long list. For one thing, even though it is a better option than bankruptcy, debt settlement will have a negative effect on your credit score. Your creditors also may report your forgiven debt to the Internal Revenue Service, which means that you could wind up having to pay taxes on those amounts. If you work with a debt settlement firm, you will have to pay a fee for any accounts it successfully negotiates down. Another big disadvantage of debt settlement is that your creditors will close any settled accounts and are not likely to extend you any new credit, which can limit your options for getting credit in the future.
If your debt settlement plan does not work out and you find yourself facing bankruptcy, you can get information about the process at www.bankruptcyadvice.com You can get answers to bankruptcy questions as well as find out about possible alternatives to bankruptcy.