Debt Settlement- Has It Hurt People More When Completed?
A lot has been discussed on the merits of debt settlement as a method that can steer people away from
bankruptcy even when they are knee deep in debt. Any person who owes large amounts of unsecured
debt can enter into a debt agreement regardless of whether his / her credit rating is good or bad.
This is a boon for people who are struggling with bad credit and have incurred debt of more than ten
thousand dollars. Working with a debt settlement company can also ensure that you are not constantly
bombarded with calls and emails from the creditors or their collection agencies. However, when you
take the decision to go in for debt settlement, you also need to be aware of the risks associated with
repaying your debt in this manner.
The major reason why many people hesitate to go in for debt settlement is because of the impact that
it can have on your credit score. Creditors are often unwilling to agree to a settlement unless they
notice that you have defaulted on the monthly repayments on your debts. For this reason, most debt
settlement companies advise you to stop making payments on your debt for a few months (three
months or more). According to them, this gives them more bargaining power with the creditors during
the negotiation process. Unfortunately the creditors will report your payment defaults to the credit
reporting agencies and this information will be available on your credit report for a long period of time.
A decreased credit score means that you may have difficulty in procuring loans in the future r will need
to pay very high rates of interest on new loans.
When the debt settlement company finally manages to successfully settle the debts with your creditors
for you, the delinquent information does not get removed from your credit report. Additionally, your
account will be updated with the terms "Charged-Off Settled" Or "Paid-Settled" which can also impact
your credit score. One way to get around this issue would be to get an agreement in writing from the
creditors that they will report the debt as "Paid in Full". This, however, is entirely up to the individual
creditor's discretion.
bankruptcy even when they are knee deep in debt. Any person who owes large amounts of unsecured
debt can enter into a debt agreement regardless of whether his / her credit rating is good or bad.
This is a boon for people who are struggling with bad credit and have incurred debt of more than ten
thousand dollars. Working with a debt settlement company can also ensure that you are not constantly
bombarded with calls and emails from the creditors or their collection agencies. However, when you
take the decision to go in for debt settlement, you also need to be aware of the risks associated with
repaying your debt in this manner.
The major reason why many people hesitate to go in for debt settlement is because of the impact that
it can have on your credit score. Creditors are often unwilling to agree to a settlement unless they
notice that you have defaulted on the monthly repayments on your debts. For this reason, most debt
settlement companies advise you to stop making payments on your debt for a few months (three
months or more). According to them, this gives them more bargaining power with the creditors during
the negotiation process. Unfortunately the creditors will report your payment defaults to the credit
reporting agencies and this information will be available on your credit report for a long period of time.
A decreased credit score means that you may have difficulty in procuring loans in the future r will need
to pay very high rates of interest on new loans.
When the debt settlement company finally manages to successfully settle the debts with your creditors
for you, the delinquent information does not get removed from your credit report. Additionally, your
account will be updated with the terms "Charged-Off Settled" Or "Paid-Settled" which can also impact
your credit score. One way to get around this issue would be to get an agreement in writing from the
creditors that they will report the debt as "Paid in Full". This, however, is entirely up to the individual
creditor's discretion.
