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What are the pros and cons of debt settlement?

| Jun 18, 2019 | Avoiding Bankruptcy

If you are struggling with debt from overdue medical expenses, credit card debt, mortgages and other bills, you are not alone. The average American household carries more than $6,700 in debt that revolves from month to month. With high interest rates and minimum payments due, it is easy to get left behind when it comes to paying off your balances. Debt settlement is designed to help people pay off their debt and emerge free and clear of financial stressors.

Debt settlement allows you to make a lump sum payment, usually a significant amount less than what is actually owed, to clear you of your debt. In many cases, the settlement goes through a third-party company that negotiates a settlement with your creditors. There are pros and cons to debt relief, however, as some companies may act as scams and affect your credit.

After you agree to allow the company to negotiate a lump sum payment for your debt, the company may ask you to make installments into an account that will later be used to make the final payment. They may encourage you to stop making payments while this is happening. This type of settlement may enable you to avoid filing for bankruptcy and help eliminate annoying creditors from calling, pursuing legal action and garnishing your wages. It is a good idea to do your research and ensure that the benefits of debt settlement outweigh the risks in your particular case. Keep in mind that your creditors may refuse to negotiate your debt. Also, not making payments on your accounts may affect your credit.

This information is intended to educate and should not be taken as legal advice.