There are various options to obtain debt relief for a debtor like - debt settlement, debt consolidation, credit counseling, filing for bankruptcy, etc.
Debt settlement is a viable option for those who have more than ten thousand dollars of debt and their financial position does not allow them to repay the whole amount.
Earlier this option was full of traps and the debtors did not prefer getting relieved from their debt using this option.
However, when the government intruded and new laws were laid, the industry was regulated to a great extent.
The government has banned the professional companies providing this service from collecting an upfront fee.
This has eradicated fake companies to a great extent and has also made the process more secure and result oriented.
Debt settlement is considered as one of the best options to obtain debt relief.
How does the settlement process work? It is a process wherein negotiations are carried out between the creditor and the debtor.
The debtor can utilise the services of a professional debt settlement company which usually charges a fee for its services.
During negotiations, the company explains the current financial position of the debtor and that he/she will not be able to repay the full amount of debt.
The process of negotiations can succeed only if both the parties do not want bankruptcy to happen.
If either the creditor or the debtor have bankruptcy in mind, the desired results cannot be achieved through debt settlement.
Once the negotiations end and both the parties agree to a reduced debt amount, things agree upon are signed in black and white.
The reduction in debt may vary from fifty to seventy per cent in most cases.
For the remaining amount a time frame for repayment is fixed in mutual agreement.
On the basis of the time frame, monthly installments are fixed and deposited in an escrow account.
The debt settlement company take its fees and the creditor gets the reduced amount of debt as full and final settlement of debt.
This ends the process of debt settlement.