Are you in debt up to your eyeballs? Can’t pay your bills, you are being harassed by the creditor calls? It is time you consider the option of

debt settlement

.

debt settlement

(also known as debt negotiation) will help you reduce the outstanding debt by 40-60 per cent of the sum you owe by negotiating with your creditors. In case of a successful negotiation, the creditor forgives you a certain amount of debt in order to help you get out of debt in a shorter period of time.

Go on reading this article and see how

debt settlement

can help you.

Whether you opt for a credit card

debt settlement

program, personal loans settlement or payday loans, you will see the benefits of

debt settlement

.

First of all, you avoid bankruptcy.

debt settlement

can help you ay off you debts comfortably and on time, moreover it can help you reduce the debt amount. It is possible to negotiate a reduction of your interest arte or the amount of a monthly payment for the one you can afford to pay. Consequently, there’s no need to file for bankruptcy and lose your home or car, or all together.

Second, if you use an agency to help you negotiate, you will have to make only one payment to the agency instead of the multiple payments to the creditors each month. The settlement company opens a trust account to accumulate your monthly payments, thus you avoid the stress of having to pay out debts at different rates and on different dates, and deal with several creditors at a time.

Third,

debt settlement

helps you avoid unfair collection practices and harassment from collectors and creditors.

Fourth,

debt settlement

can help you eliminate extra charges like late payment fees or even over-the-limit fees on credit cards.

And at last, but not least,

debt settlement

saves you from risk of lawsuits or other legal actions. If you are in a settlement program you can avoid being sued by your creditors or collection agency, as well as protect your wages from being garnished and your property from being placed a lien onto.

Now, let’s see how a

debt settlement

program works. If you choose to hire a professional for the

debt settlement

process then you must be prepared to pay a certain fee for the services. It doesn’t matter what type of debt you have, once you are in a settlement program you must stop paying your creditors and hold back the payments until the negotiation is over. It creates the necessary pressure on the creditors. When the agreement has been reached, you start paying the negotiated amount.

There are debts you can settle on your own or with the help of a settlement company, such as credit card debts, personal loans and medical bills. However, such debts as child support, car loans and mortgages, federally insured student loans and tax debts are excluded from settlement programs.

Usually,

debt settlement

companies charge debtors 25-35 percent of the debt that is forgiven as a result of the negotiation. The fees usually depend on the total amount you owe, the number of your debt accounts, and how much you save by settlement. It usually takes 2-4 years to settle debts, whether it is a credit card debt or a personal loan, medical bills or other debts. The time it takes to complete the

debt settlement

program depends on the total amount of debt you owe.

Depending on the state you live in, your creditors won’t be able to sue you after the settlement. Once the agreement has been reached with your creditors or collection agency, they can not sue you for the balance. In many states it is illegal (Texas, Georgia, Washington, Arkansas, Michigan, etc.). However, there are states where the creditor retains his right to sue you even after the

debt settlement

(for example Delaware, Alabama).

If you opt for a credit card

debt settlement

or other debts settlement, your creditors forgive you a certain amount of your debt. This forgiven amount of debt is called a cancellation-of-debt (COD) income, and according to the IRS guidelines this income is taxable. Nevertheless, you don’t have to pay tax in case the debts were settled because you have protested the owed amount.

Now, let’s see how

debt settlement

can affect your credit score. Once you stop making payments and keep the funds to let them accumulate for the settlement, your accounts may still be charged off, i.e. some of your creditors may decide your debts are not collectible anymore. Some creditors may even sell your debt to the collection agencies, and they can try harsh methods to get your debts paid out in full. However, once you start the settlement process the creditors may no longer sell your debts to the collection agencies in exchange for a partial payment. Once the agreement has been reached, the creditor reports your status “Settled charge off” to the credit bureaus. This status has a less negative impact on your credit score than the bankruptcy status. Consequently, the settlement does hurt your credit score, but only for the time being, not more. You should also keep in mind that once your debts are paid out, your credit score improves considerably.

So, how do you repair a damaged credit after the settlement? First of all, get yourself a secured credit card. It is available for people with bad credit scores and it aims at improving your credit history. Second, get a gas or a store card, because they are quite easy to qualify for. When you get a gas or a store card, use it every month and pay on time and in greater amount. Also, don’t overuse the 50 percent line of the credit, so that in time you are able to apply for a higher credit line. Third, open a savings account, deposit money every month so that whenever an emergency occurs you will be able to withdraw money from that savings account instead of a credit card. You can also use this account to apply for a secured credit card. Fourth, pay for your utility bills and rent or mortgage on time, this undoubtedly adds you positive score. Last, but not least, don’t raise your debt-to-income ratio by taking unnecessary credits. Don’t take any payday loans right after the settlement, because it will damage your credit history in case you are unable to ay off.

As a conclusion, we can summarize that

debt settlement

is a relatively easy and wise way out of debt, but you should make sure you use the services of a BBB (Better Business Bureau) certified agency that has connections with creditors and can indeed negotiate a settlement. You can also go for a self-made

debt settlement

plan, you can see our database of sample letters to help you negotiate the best way you can.