What is Debt Settlement?
Debt settlement is the process by which an individual or a company negotiates with creditors for a reduced payment of their debts in exchange for lump sum payments. If you are behind on your debts but you have a source of income or assets, you may benefit from negotiating with your creditors. Collection is expensive and uncertain, so if you offer your creditors cash, they are likely to accept a reduced offer because they would have to spend that money, and additional time, on collection services and attorneys.
Who should engage in Debt Settlement?
Debt settlement is not appropriate for everyone. The ideal client is an individual who has significant debts that he cannot handle, but has a source of savings that comprise at least half the debt load. Alternatively, individuals who do not have savings but have income are also good candidates. Note, however, that if you have significant assets that your creditor is aware of, it may work against you. A creditor may be less inclined to take a reduced payout if it knows you have a boat and a summer condo.
How much does this cost?
Debt settlement has a sordid history. In the lead-up to the 2008 crash, debt settlement companies were less regulated, and many charged exorbitant upfront fees. Many people ended up paying more to the debt settlement company than they would have paid to the creditors. We do not charge upfront fees, and only charge a percentage of what we are able to save you. The point of debt settlement is to save you money, not to add to your debt. We are glad to discuss the details of our representation with you in our office.
How Much Can I Save through Debt Settlement?
Each case is different, and we do not guarantee results. However, we start our negotiation at 20%. There are some creditors who are willing to take as little as that, especially if the individual is also considering a liquidation in bankruptcy as an alternative. Note, you do not need to file bankruptcy. The point of settling debt is to avoid bankruptcy. However, some individuals may benefit from bankruptcy more than debt settlement, and we are able to offer that analysis to our clients.
The amount that we can settle for you also depends on the structure of the settlement. As a general rule of thumb, the more funds you have for your creditors upfront, the more of a break they will give you. If all you can offer is a monthly payment to them, many creditors will only consider a monthly payment for the full balance of the debt. However, you may also benefit from a blend of upfront and monthly payments that can still end up saving you money depending on the size of your debt and the interest charged. Call us with the details of your situation so that we are better able to advise you.
We are Well Positioned to Settle your Debts
We often get the question "well, why don't I negotiate with them?" We certainly encourage you to try. However, as debt settlement attorneys who also specialize in defending lawsuits and bankruptcy, we often have a better idea what your creditor's bottom line is. We are able to effectively negotiate with creditors because we have other legal options at our disposal. We can answer their complaint and drag a matter through small claims court. As an individual, your leverage with creditors is limited.
Also, we know what the bankruptcy alternative looks like. If you qualify for relief in bankruptcy, we use that fact to our advantage in our negotiation - even if you do not plan on filing. That tactic often gets us a lower settlement figure. Lastly, we have done this before. We know the creditors, and we know what they go for and what they don't go for, so you will be well-informed of your choices before you even sign up.
Credit Repair Specialists are Available
Upon clearing of your debt, we connect you with our credit repair specialists. They are able to contact the credit bureaus and clear your credit quickly, so that you can be on your way to repairing your credit fast. Learn the tactics of repairing your credit so you can start early. Give us a call today and get on a path to a debt-free life.
This content was written on behalf of Greg Prosmushkin.