Do you want to negotiate your debt numbers directly with creditors? While that is a great idea, doing it yourself can get quite tricky. This is where a debt settlement specialist comes in. They are excellent negotiators and can help with your settlements. As a specialist manages multiple accounts, they tend to get the most lucrative deals from creditors than you ever could by dealing with them directly. But before hiring one, you need to know the most important things about debt settlement.

Keep reading to learn everything you should know about the process. Let’s dive in. 

Which Debts are Eligible for Debt Settlement?

If the creditor agrees, most unsecured debts are the ones usually eligible for debt settlement. The creditor has no obligation to accept a settlement offer. Unsecured debt includes personal loans, store cards, card debt, medical bills, and other such debt that is not associated with collateral that the creditor can take over. 

Debts that are usually non-eligible for settlement are tax debt, student loans, car/mortgage loans, and debt incurred by your business/self-employment. Before getting into a settlement, ensure that the debt you want to settle is eligible for settlement, and doesn’t fall into one of these categories. 

Is Debt Settlement Worth it?

Even though debt settlement has its cons, it can be a good debt relief option in certain financial situations. People owing a huge amount to a creditor may consider a settlement worth it. If a creditor wants to accept 50% or more of what you owe to settle debt, which you wouldn’t be able to repay, you should get into a settlement. However, you should assess the pros and cons of debt settlement before getting into it. 

Benefits of Debt Settlement

Debt settlement can be quite beneficial as it reduces your balance by a huge amount. This process helps in preventing bankruptcy for those who can pay the settlement charges. Once you pay the debt, collection agencies/collectors stop calling you. 

How Does Debt Settlement Differ From Debt Consolidation? 

Debt settlement allows the creditor to agree to accept less than the amount actually due. However, they may not get the payment for some time as you transfer money to an escrow account until a sufficient amount is gathered to pay the agreed sum. 

While debt consolidation aggregates multiple debt accounts into one account with an interest rate and a monthly payment, you must know that you will have to make payments for all of them put together, to a financial institution/debt management company. Your payment should have a lower interest rate and lesser than the combined payments you previously paid. 

You may pay a lesser overall balance with debt settlement. However, debt consolidation doesn’t affect your credit score the way settlement does. 

Hopefully, we helped you to learn the most important things about debt settlement. The Law Firm of Joseph M. Bochicchio has been offering expert legal representation to North Carolinians struggling with bankruptcy and debt settlement since 2002. Our agents with the Internal Revenue Service can also resolve your tax matters. 

Once you partner with us, our law firm works to restructure and modify existing debt to more reasonable terms so you can make payments comfortably. We can also negotiate any bankruptcy or tax concerns for you as well. Don’t face a complicated financial crisis alone. Get a free consultation today.