What Could Possibly Go Wrong With Debt Settlement?
Wouldn’t it be nice if you could pay $500 to make an $800 debt go away? Sometimes you can. When creditors despair of collecting the full amount of a debt, they are sometimes willing to discount the amount that they originally asked for, based on the principle that getting some money is better than getting none. Collection agencies operate by getting creditors to sell debts owed to them for a fraction of the face value of the debt; when a collection agency buys your debt, it its effectively settling the debt with the original creditor and then turning around and asking the original borrower to settle the debt for more than what the collection agency paid to it, or worse, to get borrowers to pay in full. In some cases, settling your debts for less than what you originally owed is your best option, but it is not exactly a freebie. To find out more about debt settlement and other strategies for getting out of debt, contact a Boca Raton debt lawyer.
What Is Debt Settlement, and When Is It Appropriate?
Debt settlement is when the creditor and the borrower agree that, in exchange for the borrower paying a lump sum that is substantially less than the amount the creditor originally requested, the creditor will consider the borrower’s debt obligations fulfilled and will forgive any remaining balance the borrower owed to the creditor. Many borrowers choose to settle debts if they are able because it instantly makes the creditor stop pursuing the borrower about repayment. If you are able to settle some of your debts, doing so may even enable you to avoid filing for bankruptcy, thereby avoiding the associated court hearings and long-lasting damage to your credit score. Businesses that are closing usually choose to settle their debts, because it is often the only way that the creditors can get any money out of what they lent to the business.
Debt Settlement Is Not a Perfect Solution
Debt settlement is better than a constant stream of phone calls and other communications from creditors and collection agencies, and it is better than filing for bankruptcy and then having to rebuild your credit almost from zero, but it is not exactly painless. Settling your debt can lower your credit score, even though the effect is not as pronounced as a bankruptcy filing would be. Likewise, settling your debt is not always as inexpensive as the original settlement offer notice made it sound. There might be fees associated with it, even though they will not add up to the original amount you owed. Finally, debt settlement is only an option if you can put together enough money to pay the lump sum required to settle.
Contact a South Florida Debt Lawyer About Debt Settlement and Its Alternatives
A South Florida debt lawyer can help you decide whether debt settlement is the right option for you, or if you should file for bankruptcy or take out a debt consolidation loan. Contact Nowack & Olson, PLLC in Jupiter, Florida to discuss your case.
Source:
credible.com/blog/personal-loan/debt-settlement-pros-cons/
