Debt settlement, also known as debt arbitration or debt negotiation, is an approach to debt reduction in which the debtor and creditor agree on a reduced balance that will be regarded as payment in full.
As long as consumers continue to make minimum monthly payments, creditors will not negotiate a reduced balance. However, when payments stop, balances continue to grow because of late fees and ongoing interest. Done correctly, debt settlement can absolutely help people.
How Debt Settlement Works
Essentially, debt settlement is the process of negotiating with creditors to reduce overall debts in exchange for a lump sum payment. A successful settlement occurs when the creditor agrees to forgive a percentage of total account balance. Only unsecured debts not secured by real assets like homes or autos can be settled. Unsecured debts include medical bills and credit card debts – not student loans, auto financing or mortgages. For the debtor, this makes obvious sense, they avoid the stigma and intrusive court-mandated controls of bankruptcy while still lowering, sometimes by more than 50%, their debt balances. Whereas, for the creditor, they regain trust that the borrower intends to pay back what he can of the loans and not file bankruptcy (in which case, the creditor risks losing all monies owed).
Negotiating with a collection agency or junk debt buyer is somewhat similar to negotiating with a credit card company or other original creditor. However, many collection agencies (or junk debt buyers) will agree to take less of the owed amount than the original creditor, because the junk debt buyer has purchased the debt for a fraction of the original balance. As a part of the settlement, the consumer can request that collection is removed from the credit report, which is generally not the case with the original creditor.
Can it help you?
American consumers have historically high levels of debt. Combine this with a high jobless rate and shrinking credit availability and you have the recipe for disaster. Helping these consumers is the goal of the debt settlement industry.
Advantages of an Attorney Model
- Availability to Generate and Conduct Business in 47 States.
- Each consumer will be represented by an Attorney or a team of Attorneys in their state.
- Because the Attorney’s group is in the same state as the client, the consumer’s rights can be even better served.
- 24/7 Prepaid Legal to address any and all personal issues or questions.
The Attorney Network consists of attorneys nationwide. Therefore, within every major city there is someone available to assist the consumer. This highly sophisticated attorney network was designed to manage the rights of clients. This system involves constant communication and balance between the processing team, the consumer, and the attorney.