Who qualifies for debt settlement?

Fees Freedom Financial does not charge upfront fees. But if the company successfully negotiates a debt settlement for you, it normally charges you a commission of 15-25% of your total debt. Rates may vary depending on where you live. Credit card companies rarely have specific guidelines.

However, good candidates are usually those who are unable to pay their monthly payments. Credit card settlement offers debt relief without the stigma or damage of bankruptcy. Debt settlement companies negotiate with creditors to reduce what you owe, especially on unsecured debts, such as credit cards. It is not an option for certain types of debt, such as a house that can be foreclosed or a car that can be recovered.

Generally, companies don't pay off federal student loans, but you may be able to pay off your student loans on your own. If you're having trouble with your student loans, an income-based repayment plan might help. Just because the debt settlement company provides a safety net somewhere down, doesn't mean you don't keep doing a tightrope act. The account administrator may charge you a reasonable fee for maintaining the account and is responsible for transferring funds from your account to pay your creditors and the debt settlement company when settlement occurs.

There's nothing that says you can't borrow from some of the debt relief options listed above and create your own plan. But they can often recover more funds through debt settlements than other collection methods, such as hiring a collection agency or an attorney. In credit counseling, agencies establish low-interest debt management plans that allow borrowers to repay unsecured debts over time. When you begin the debt settlement process, the debt lawyer or outside company will often recommend that you stop making your debt payments.

Usually, debt settlement companies ask you to stop paying your creditors and to put the money in an account they control. The most common form of bankruptcy, the Chapter 7 liquidation, can erase most credit card debts, unsecured personal loans, and medical debts. A debt settlement company acts as an intermediary between you and your lenders and creditors to reduce or eliminate your debt. That said, you have to approach it carefully, because working with a debt settlement company may not solve the problem and may even put you in a deeper financial hole.

It won't erase taxes owed or child support obligations, and student loan debt is highly unlikely to be forgiven. Debt settlement can offer a solution, although, as you have already read above, it must be approached with care. While debt settlement may seem like a good idea, it's not always the best option to deal with your debt. The most popular debt relief programs are debt negotiation (also called debt settlement), consumer credit counseling, debt consolidation loans, balance transfers, and filing for the most serious bankruptcy of all.

Jayne Kilbury
Jayne Kilbury

Professional music lover. Avid writer. Lifelong coffee ninja. Award-winning twitter guru. Total internet aficionado.

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