In a debt settlement program a person has to first be accepted due to the nature of the work. Once accepted He or she then begins sending money to fund an escrow account over which they have total control over throughout the process. When a sufficient amount of money has accumulated in the escrow account the negotiating company will be contacting the client’s lenders to negotiate settlements. The way it works is that a debt counselors will offer to settle the debt with a lump sum payment but for less than the debt’s face value. which is a specific form of debt consolidation that involves redirecting all of your monthly payments to a debt settlement account while a team of specialists communicate with creditors on your behalf. Once you have saved enough funds in your debt settlement account and the negotiators have worked out a legal settlement agreement, the funds you have saved in your account will be sent to your creditor as part of a lump sum offer or payment plan. Often times, debt settlement companies are able to work out settlements that are lower than what you originally owed your creditor. As an example of this, our counselor might negotiate with a credit card company to get a client’s debt reduced from $15,000 to $7500. In the event the lender agrees to our settlement offer the client will then be asked to release enough money from his or her escrow account to pay the settlement. Of course, not all lenders will agree to settle for less than the total amount of the debt. However, if you are working with a reputable company they should already know what to expect from lenders if you are accepted into their program. There are two types of personal bankruptcies. They are a chapter 7 and a chapter 13. Regardless of which one you qualify for your debts or a sizable portion of them will be dismissed or wiped out. While this may seem like an easy out, it’s important to consider that there will be a stain in your credit reports for 10 years. A chapter 7 bankruptcy would likely lower your credit score by several hundred points, which can make it almost impossible for you to get any new credit for 2 to 3 years. When you finally are able to get credit it will be low-money, high-interest credit. A bankruptcy will stay in your credit files for 10 years and in your personal file for the rest of your life
Typically, you can complete a debt relief program in 24 to 48 months, though the length of time it takes to complete a debt relief program can vary by debt relief company.
You certainly can pick up the phone, call your creditors, and try to negotiate settlements with them yourself. Sometimes, creditors may work out payment plans or debt reductions if you pay in cash. Others may offer payment plans if you have experienced a true hardship, such as a job loss. Keep in mind that you might need to be prepared to draw up paperwork that states the terms, and get their signature agreeing to them.
Unfortunately, depending on your life right now, you may not be in a good position to negotiate on your own. Calling all your creditors and following up with the necessary paperwork can be time-consuming, and their business hours can be limited
A key part of the debt settlement process is debt negotiation. That’s when a creditor agrees to reduce the amount you owe and “settle” the debt for less. Believe it or not, this is a very standard process for creditors and other companies that manage debt. Many creditors routinely settle accounts for less than the amount owed. Your creditors may be among them.Because they hope that you will end up getting more credit cards with them again once that particular one is paid off.
Ask yourself which is more important to you at the moment……Money or Credit?