Debt Negotiation or Settlements

Debt Negotiation or Debt Settlement

What are a person’s options if they owe a debt they cannot pay and do not choose or can’t file bankruptcy?

Debt Negotiation or Debt Settlement, is an option for most outstanding personal debt.  It is a process where debt is settled for less than the outstanding balance in full payment and satisfaction of the total debt.

How does a person qualify for Debt Negotiation?

Generally, a creditor will not negotiate a debt settlement if the consumer is currently making all their monthly minimum payments.  However, once payments stop and balances continue to grow because of late fees, interest, and other charges, lenders or collectors are usually willing to negotiate a settlement.

What debts qualify for Debt Negotiation?

Most personal debt will qualify as long as the creditor is willing to negotiate the debt.  A creditor is not obligated to participate in debt negotiation.  Some debts that do not qualify are secured debt (home and car loans), tax liens, domestic judgments. Recently we have started negotiating guaranteed student loans.

How much can a person expect to save with Debt Negotiation?

There is no set amount or percentage a consumer can expect to save.  It depends on the creditor or the collector and the debt.  However, a consumer can save as much as 50% or more when using an experienced attorney.

Are there any drawbacks to Debt Negotiation?

Yes, the most obvious being the consumer’s credit report will show a settlement for the debt which is not as good as paying the debt in full.  However, for a debt that has been charged off as a bad debt by the creditor, a settlement will result in a better credit score than no payment on the debt or a charge off or a judgment if you are sued.

The consumer must also have a source of funds for paying the lump sum or installment (monthly payments) settlement.  Generally, the creditor or collector will give the consumer 90 days to pay the settlement if a lump sum settlement is made.

Finally, any money saved in the settlement may have tax consequences.  It is important to consult with a tax professional or attorney.

How can an attorney help with Debt Negotiation?

An attorney can negotiate the best settlement of your debt.  Many factors determine the amount of a settlement.  An experienced attorney understands the importance of these factors to negotiate the best settlement.