subject: How A Debt Settlement Program Works [print this page] How A Debt Settlement Program Works How A Debt Settlement Program Works
When one is over their head in debt and there are creditors pounding on the door, it often comes to the point where any solution sounds good. Reading about, and hearing, advertisements on television regarding companies offering a debt settlement program that could cut one's debts in half or get them wiped out all together sounds too good to be true and there is risk involved.
There are some facts that a person in this situation should know. Creditors would sooner reach some sort of a settlement rather than lose it all in bankruptcy court. However, before engaging a company to do this kind of work it is important that they be thoroughly researched regarding their reputation and also the fees they charge.
To enter a debt settlement program it is necessary to have some cash. Many creditors will settle the debt for a onetime payment of up to seventy-five percent of what is owed. Creditors, as a rule will not even discuss a settlement with someone who is current on their payments. It is only those who are two to six months behind on their account that will be considered.
Creditors do not like to advertise that they have made a settlement so a report to the credit bureau will show the account paid in full. This does not give a clean bill of health with the credit bureau if there was a previous record of late payments or charge-offs on one's account. One should not expect to receive credit from this creditor at a future date.
A good debt settlement company will not tell their client to stop payment to creditors. This will do nothing but cause more difficulties with bill collectors. They will work out a plan that is within their client's financial situation to help them get out of debt.
Many states are now passing laws to have companies engaged in this business be licensed and bonded by the state. This is for protection of the consumer to be sure they are working with a legitimate company that can assist them with their financial problems. A good company can do this and will be honest as to what one should expect. That is what a debt settlement program is all about.
Finding legitimate debt settlement companies is not that difficult but consumers must know where to look. It would be wise to utilize a debt relief network that will qualify the companies for you and ensure that they are legitimate and have proven themselves.
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