Benefits and disadvantages of Debt Settlement

August 17, 2009 debt Debt Settlement

Debt Settlement is an attractive alternative to bankruptcy for those who want to pay back at least a portion of their debt, but cannot afford the Debt Management Plan payment, and have stopped paying their unsecured creditors. With Debt Settlement, you make monthly deposits to a Settlement deposit account in an amount you can afford. You do not make monthly payments to your creditors, and your provider works to negotiate with your creditors for a less-than-full repayment. When settlements are reached with creditors, settlement payments are paid from the Settlement deposit account. There are definitely pros and cons to using Debt Settlement to pay off your debt.

Pros

• May reduce your total debt drastically
• You save each month an amount you can afford to use to fund settlements
• Provides flexible payment arrangements (changes can be made if needed)
• Attractive alternative to bankruptcy
• Settlements typically completed in 3-5 years

Cons

• Credit profile will be negatively impacted
• Debt is not repaid in full
• Creditors are not required to accept settlement offers
• Debt balances are likely to increase (i.e. late fees, interest) while settlements are being negotiated
• Collection activity will escalate
• It typically takes 6+ months before the first settlement occurs
• You may be taxed on the portion of the debt you don’t pay back

Related posts:

1. Credit Card Debt Consolidation and How To Eliminate Debt
2. Credit Card Debt Consolidation: Finding The Right Program – Advantages And Disadvantages
3. Need to Know Facts Regarding Lawsuit Settlement Loans
4. Debt Management in America Today
5. Save Money Using High Interest Rate Savings Accounts

Benefits, Debt Settlement, disadvantages,