Debt Settlement 101 – Save Money with Debt Settlement

By Wes Martin - Jul 15, 2009

Today I’ll discuss what debt settlement is and how it may be a great way for you to finally pay off your debt. Let me start by saying that a debt settlement program is not for everyone. If your credit is good and you’re struggling to pay your bills consider a debt consolidation program as it is a better option. If you’ve gotten behind on your payments and you are just unable to make payments, it’s time to speak with a debt settlement company. Debt settlement is the process of negotiating with your creditors to settle your remaining balance. 99% of the time, you will pay back significantly less than what you owe. Why would a creditor accept a debt settlement? Well they would rather get something than nothing. You may be wondering how a debt settlement company work. When you contact a debt settlement company and join their program, they will notify your creditors that they are representing you. At this point, you no longer make payments to your creditor. You send payments to the debt settlement company. After a 12 month period, the debt settlement company starts negotiating with your creditors to settle the debt with a lump sum payment. So if you owe $10,000 to you creditors, over the 12 months, you may have made payments of $4000-5000 to the debt settlement company. They use some of that money to make an offer to the creditors. I many cases the creditor accepts the offer and you’ve saved 60%. One of the best benefits of a debt settlement program includes not having to deal with your creditors directly anymore. The settlement company handles all communication on your behalf. A debt settlement program can lower your credit score temporarily; however, if the program is successful in settling your debt, over time your credit score improves because you no longer have to deal with that debt.