When is Debt Settlement Worth Trying?

You likely have heard about a debt relief strategy that lets you pay just a portion of what you owe to satisfy your credit card debt. You might think that sounds too good to be true — except it isn’t. It’s a proven approach that has saved scores of people like you from the specter of bankruptcy and put them back on solid financial ground. But exactly when is debt settlement worth trying? Let’s look at that and more.e

What is Debt Relief?

It’s a financial strategy wherein you pay a company such as Freedom Debt Relief to see whether the businesses you owe would be willing to let you pay just part of your debt in a one-time payment in full in exchange for having your debt marked as “settled” on your credit reports. It happens all the time. In fact, creditors tend to go along because they know all too well that if you file bankruptcy, they’ll likely be up a creek.

How Does Debt Relief Work?

Your settlement company will go over your situation with you and establish a payment plan. It will then ask you to make monthly deposits into an escrow-type account you control. Once you’ve saved enough – that’s determined by the amount of debt you have as well as your income – your negotiators will go to bat on your behalf, using the account as a bargaining chip. After each debt is settled, payment is derived from your account.

Will Debt Relief Hurt My Credit?

Temporarily. The process of debt relief will cause your credit scores to drop, but that’s just until your settlement program is complete, and you’ve begun rebuilding your credit. Keep in mind that your scores have seen better days right about now anyway, eh?

How Long Does Debt Relief Take?

You can count on between 24 and 48 months, although you’ll likely have your first debt settlement within a few months. In any case, it would take you longer were you to attempt to clear your debts by making minimum payments. That would take many years, if not decades. You also know that you didn’t get into such trouble overnight.

How Does Debt Settlement Compare to Bankruptcy?

For one thing, bankruptcy can stay on your credit for up to a decade. During that time, you’ll have a difficult time getting any kind of credit, and you may have trouble gaining employment or renting an apartment. With bankruptcy, you also may have to relinquish some assets. It’s best to speak to a professional if you’re considering bankruptcy – depending on your location, you could search for a bankruptcy attorney in Arizona.

What Kinds of Debt Can I Enroll?

It depends on the company, but you can typically enroll unsecured debts such as credit card, medical bills, or personal loans. Secured debt – that which is tied to collateral such as your house or car – generally isn’t accepted.

When Should I Enroll in Debt Relief?

There are a few things to consider.  First off, you must be behind in your in your debts. If your creditors whiff that you might be able to pay them all that you owe, they likely won’t work with you.

You also must have the wherewithal to be able to sock away funds each month to make your one-time payment in full. Face it: you’re going to have to pay at least a quarter of the original total owed.

It also may be time to enroll in debt relief if you’ve considered filing bankruptcy. If that strategy of last resort crosses your mind, you may be a good settlement candidate.

What’s more, you should only try debt relief if your spending is under control, and you’ve made a long-term commitment to clearing your debt.

When is debt settlement worth trying? Now you know. You also know more about how debt relief works. What’s most important is that you don’t sit pat. Act on your newfound knowledge.