Debt settlement, also known as debt arbitration or debt negotiation, is an approach to debt reduction in which the debtor and creditor agree on a reduced balance that will be regarded as payment in full. Essentially it is negotiating your bills away so you will owe between 20% to 75% of your original debt. Creditors are usually willing to negotiate this because if you file for bancruptsy, they will get nothing. When negotiating this debt, the debtor, will have to pay a one-time lump sum payment to the creditor which will then forgive the rest of your debt and reports to the credit bureaus as settled.
Now what they don’t tell you is that creditors will not talk about debt settlement with you, if you are current on your monthly bill(s). They tipically want you to be 3 to 6 months behind before they will let you settle. This means you will be getting calls from collection agencies while you wait and save up your money for the one-time cash settlement.
Debt Settlement Companies
MSN Money Central talked to Deanne Loonin, a staff attorney with the National Consumer Law Center (NCLC) talked to about the practices of debt-settlement companies. To summerize the article, she claims most debt settlement companies charge outragious fees that nobody understands for questionable services that typically don’t result in any debts being settled.
ZipDebt.com is a website that coaches individuals on a do-it-yourself debt settlement. I recommend anybody who meets the debt settlement criteria to check out this site and attempt to do-it-yourself.
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