Debt settlement commonly referred as debt negotiation is an old concept but is becoming more and more commercialized and popular for people that are burdened with unmanageable debt situations. Debt settlement means: paying a creditor less then the amount owed by negotiating the balance.
Debt settlement is only possible with debts that are seriously delinquent or in collections. The reason for this is, once a debt is seriously past due or sent to collections; the creditor has already charged the debt off. You see, for most creditors when a debt is past due, there is a specific process in dealing with the debt. They will add late fees, over limit fees as well as excessive finance charges. Once the debt has increased due to the account status, the creditor will look for ways to reduce their loss. The second step is for the creditor to charge the debt off. This means that the creditor believes the debt is uncollectible and the creditor no longer wants to pay taxes on the debt as an asset for the company. So when the creditor charges the debt off, they get a tax break. At the same time they are now restricted form attempting to collect the debt, so usually they will sell the debt to a third party debt collector. Once the debt has been sold, the new debt collection agency will attempt to collect the debt. If they are unsuccessful, chances are it will be sold again and again until they are successful. After the debt is sent to collections you have a much better chance of settling, that is if they don't sue you. Many creditors and collection agencies would rather settle then sue because it is much more cost effective. Even if they sue, they still need to collect which leaves them in the same situation. The older the debt is, the more likely it is that they will settle.
Beware of bad debt settlement companies. Every industry has its share of bad apples and con artists, the debt industry even more so. Many predatory companies prey on vulnerable and desperate people looking to help their situation and only end up with far worse problems. We have had reports of debt settlement companies doing many unscrupulous things to their trusting clients from giving misleading and inaccurate information to taking payments intended to settle accounts and just keeping the money.
If you have unsecured debt that you are wanting to settle, you may want to consider calling us for a free debt analysis consultation.