If you are looking for a way to get out from under your debt, you may want to work with a settlement agency to attempt to settle your balances for less than the total amount owed. Settling debt for less than what is owed usually happens as a result of debt negotiation. While you can attempt debt negotiation on your own, you may have better luck working with an advisor who has experience in this area to get the best possible results.
Many times companies will sell outstanding debts to a third party debt collection agency. Debt collection agencies then attempt to get as much as possible for the purchased debts, but will often be willing to negotiate for a percentage of the original debt. Debt settlement is only available for unsecured debt like credit cards or medical bills, not for debts secured by assets like mortgages or car loans. Money owed for child support, student loans or back taxes are also types of debt that cannot be resolved through debt settlement. However, if you owe unsecured debt that you just can’t get paid off and you want to avoid bankruptcy, debt settlement could be a solution.
If a debt settlement company tries to guarantee you they can negotiate settlements on 100% of your debts, a red flag should go up. There is no way any company can guarantee you a settlement for less than what you owe, unless you are talking to the people you owe the money. Some debt settlement agencies will charge a large fee for negotiating your settlements and that fee may cost you just as much as paying the entire debt.
If you do reach a settlement offer with a creditor, be aware that you will still have a negative report on your credit rating. It will show that a settlement was reached, so don’t assume negotiated percentages will repair your credit rating.
Whenever you are communicating with a creditor about a debt settlement, make sure you get everything in writing. In some states it is legal for a creditor to agree to a debt settlement percentage and then still sue you for the remaining balance. Keep a copy of all correspondence and send your communication by registered mail so you have a receipt.
Debt settlement for less than the full amount owed is possible, but you need to make sure you are careful to document everything so you have evidence of the bill having been paid.