Debts-Relief

Debt settlement can be a viable alternative if you do not qualify or if you do not wish to file for bankruptcy protection. To settle a debt, we negotiate with your creditor to reduce the principle balance by 20% to 75% in exchange for you to make a one-time payment.  It is more advantageous for people who can raise the cash quickly, since settle the debt quickly also mean you pay less interest charges and late fees. Some creditors will accept several payments to settle a debt, but the reduction of principle will be less than if it is paid in a lump sum.

If you are unable to raise the cash necessary to settle the debt right away, the alternative will be instead of making payments to creditors monthly, save them until there is sufficient sum to settle with one creditor, and then do the same with other creditor, until you have fully settled with all of them. Since this approach usually takes several years, the dangers of it are that interest and late fees are fast accumulating, you could be sued in the meanwhile, and your credit will continue to suffer. Since the dropout rate is quite high based on anecdotal evidence, consumers should be cautious with this approach.

The percentage reduction of each settlement varies with each creditor, and is dependent upon many factors, such as policies of the creditor, the value of your non-exempt asset, and the amount of equity in your house and other real properties, etc. As a rule, creditors won’t negotiate with consumers who are current on their bills. They usually refuse to discuss settlements unless you are at least a few months behind.  

Debt settlement is a taxable event. Even though the balances of settled debts will show zero, your credit score will be affected by each of the settlement event, and any history of delinquent payments and charge-offs will remain on your report for seven years.