Many people will usually misunderstand the settlement and negotiation process as it relates to credit card debt. On television, for example, the idea that debt can be quickly settled is a sham because that is the furthest thing from the truth. In fact, debt settlement may not be the ideal option or solution for many people that want to clear the balances on their credit card. Debt settlement may not be for you. However, below are some tips so that you can have information about whether this is the route to take or not.
First, you have to be realistic about your debt situation and have a goal of what you are trying to accomplish. Is it bankruptcy that you are trying to avoid or are you looking for an easy way out of the debt that you subsequently caused? Whatever the reason, you have to be upfront on the seriousness of it all.
If you are filing bankruptcy to avoid the negotiation of a credit card settlement, you may be better off, but it depends on the extent of your debt. However, many credit card companies would rather settle with you rather than have you file a Chapter 7 bankruptcy and then have all the debts discharged including theirs. However, when the debt is settled, you may end up damaging your credit as you would for a bankruptcy. The bankruptcy will be discharged after 10 years, but some settlement amounts will stay on your credit report for a long time because the creditor failed to report it to the credit bureau.
When you have a damaged credit report, it will be more difficult to get new credit. In addition, you may be charged a higher rate of interest for having bad credit due to the negotiated settlement. This will also show up on any background checks done by employers. Do you want to take the risks involved? On the other hand, bad credit caused by debt settlement is better than bad credit caused by a bankruptcy filing. The bankruptcy will loom over your head longer and so for that reason, credit card debt settlement could be the most viable option.
There is no ‘cut and dry’ answer to whether debt settlement is best for any particular person. It depends on your debt situation and how the creditors will respond. It can be safely said that if you are behind on the payments to your credit card company for several months and you don’t have any solution to making payments, it is time to call the debt settlement company to negotiate on your behalf. This is especially true when you have multiple creditors being affected by your financial situation. Why? Well, the debt settlement company will call each creditor on your behalf and negotiate for an amount that you can afford to pay. This would be carefully assessed prior to the call.
Don’t confuse debt consolidation with debt settlement. With debt settlement, you have to pay off the entire negotiated amount. With debt consolidation, you are allowed to pay one monthly premium, no matter how many creditors you had.