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Multiple Debt Settlement Plans

If you are considering methods and strategies to get rid of excessive debt, there are multiple debt settlement plans available from which to choose.

What is Debt Settlement?

Debt settlement, in its basic form, is a process of securing a reduced total debt amount from creditors, in the event that the monthly payments on such debt cannot reasonably be made.  The situation usually occurs when a consumer has engaged in irresponsible or impulsive spending for a lengthy period of time or when financial circumstances change negatively, due to job loss, demotion, or medical issues. 

The Options

When an individual determines that debt settlement is the best solution to credit problems, he needs to select from procedural and payment options, dependent upon his financial circumstances and the requirements of the creditors, as follows:

1. He can attempt the debt settlement himself, debt negotiating with each creditor for a lower total amount of debt and a payment plan that his budget will allow.  This requires great skill and commitment, and individuals sometimes obtain as much as 50% reduction in total amount owed.  Unless the debtor is 60-90 days late in payments, however, no creditor will consider such negotiation.
2. He can employ the services of an attorney or a debt settlement firm, for a fee.  The negotiations are all conducted between the employed settlement agent and the creditor, relieving the timid and the non-committed of an often arduous and complex process.
3. If debts have been turned over to collection agencies or companies, the process can become more time-consuming, and the negotiations more complex.  It will be important to know whether the original creditor has simply contracted with the collection service or has actually sold the debt to a collection company.  This important fact will determine how much the debt can actually be reduced.
4. If the debtor is not able to pay the reduced settlement amount in full at the time of settlement, arrangements will then have to be made for payment plans.  These are often secured with individual creditors or by securing some type of debt consolidation loan to pay off the settled debt.  Homeowners can often access some of the equity in their homes for this purpose, and the interest rates on these loans will typically be far less than conventional consolidation loans.

Other settlement plans include combinations of the above.  An individual may be able to negotiate with some creditors but not with others, and will thus need settlement services of a professional.  Some creditors will only take full payment once the settlement is reaches, while others will be willing to set up payment plans.  Each creditor must be approached individually in the settlement process, because the “rules” will be different.