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Understanding Debt Settlement Before You Even Consider It

Author : Betty Miller

The United States is one of the countries with the greatest number of people who have problems with their unsecured and secured debts. There are different reasons why people fail to pay off their debts some of which are sudden loss of job, problem with the business and additional expenses like hospitalization. Also, there are various solutions for debt problems, one of which is debt settlement.

What is Debt Settlement?

Debt settlement is the process of bargaining with the original creditor or a collection agency for either a reduction on your debt or for more convenient ways of payment. Sometimes, the process may involve the removal of interests on debts so you will need to pay only the original amount of debt. Other times, it is in the form of lower monthly payments.

When you start taking calls from the original creditor or a collection agency and show interest for a settlement, they may suggest payment. Debt or credit settlement differs from payment. The former is more convenient for people who are having difficulty in raising money because payment will only restart the statute of limitations giving the creditor or collection agency more time to sue you. The payment will also entail interests that may make it harder for you to pay off your debts.

How Debt Settlement Companies can help?

One can opt to propose a settlement to his creditor or collector. However, there are many cases wherein original creditors and debt collection agencies do not agree with a personal request for a settlement. Fortunately, there are debt settlement or debt relief companies who can help people having trouble with debts. These companies will charge a certain fee for their service. Nevertheless, their fees can be much lower than what you will need to pay if you opt to pay your creditor in full or have your case reach the court.

The services of these companies are generally beneficial for they do not only help in reducing the amount that you need to give to your creditor but also help you in getting rid of the nerve-racking procedure. They will require you to make an account and raise money for the lump sum. These companies will take care of negotiating with the creditors and collection agencies as well as in sending them your settlement as soon as you have raised a lump sum. After a successful negotiation between the creditor and the debt relief company, you will usually get a peace of mind because the creditors or collectors will stop calling you.

Is It Good to Go to a Debt Settlement Company?

There are many organizations and companies that help people to get debt relief as well as credit settlement in the United States. Some are legitimate while others are not. With the new Debt Settlement Consumer Protection Act introduced by Senators Claire McCaskill and Chuck Schumer and passed on October 27, 2010, the risks of being fooled by the deceitful companies claiming to help you with debt and credit settlement is reduced. With the said new laws, the said companies are ordered to collect lower fees and collect them only after the debt problem is solved.

Author's Resource Box

Lee is an expert in the area of debt collections. Lee has been through credit card debt settlement and is now debt free, he has written about his entire journey on his blog located at

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Tags:   Debt Settlement, Credit card debt settlement, Debt settlement companies, settling credit card debt, debt settlement laws, credit card sue

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Submitted : 2011-07-31    Word Count : 373    Times Viewed: 1718