How does debt settlement work?
Debt settlement is the term applied to the agreement that originates through negotiation with the lender. debt payment agreements usually result in debt reduction. The debtor gets obligated to pay the reduced debt in a lump sum instead of monthly payments. People will refer to debt settlement with other words like “debt adjustment” or “debt relief.”
As mentioned before, for a successful debt relief result, you need to be a skilled debater to convince your creditors. The debt relief process is a matter of professional debate. For an acceptable result, you must know the laws. Moreover, you have to be familiar with the relevant letter writing methods.
Therefore, if you are suffering debt settlement issues, we offer you to hire a debt settlement company to get professional help.
Hiring a debt settlement company helps
Hiring a debt settlement company will ease and accelerate your debt settlement process for some logical reasons. Most debt resolving companies have expert attorneys who are well experienced in the debt relief process. A knowledgeable and skilled lawyer is the only one who can achieve your desired results. Paying a company is like a bonus for your future financial status. A reliable company would:
- Dedicates the Duration of the process
- Estimates the result
- Tells you the amount of money you should save before the process
- Has easy to understand policies
- States all available debt relief solutions
What a debt settlement attorney exactly does?
A debt settlement attorney negotiates with your creditors and regulates new settlement plans for you. Briefly, they convince the creditor to replace your monthly payments with a lower lump sum amount. Otherwise, they will file you for bankruptcy, and the loaners won’t be able to catch a penny. Any wise credit prefers less settlement to no settlement at all. It is a win-win method, the creditor is paid, and you pay less.
Are there any risks?
Eventually, yes! Debt settlement has its disadvantages beyond the remarkable profit. Hiring a debt settlement company has three main cons:
- High cost
Most debt settlement companies will charge you for some fees, which are not only non-refundable but also add to your payments. Since you have debt, settlement issues paying this fee can have adverse effects on your financial status. In some conditions, if adding these fees to your total payments can affect your settlement agreement, too. Furthermore, there is no guarantee that the loaner will accept to change settlement terms.
- Credit score decrease
As you have set a new settlement agreement, the settlement will likely be reported to one of the main three credit bureaus. Although you work directly with the creditors, the credit bureaus will report this settlement on your credit report. Because the credit history is one of the crucial aspects that credit score modeling systems consider, you will face a credit score reduction. A low credit would limit your credit power. Other adverse consequences of bad credit are more restrict loan terms, difficulty in employment, and….
- Adverse tax implication
Your tax will likely increase after the debt released! That is because after the creditor accepts to exchange the lower lump sum money, they will notify the IRS. The money that you have earned from the subtraction of a new debt amount and old debt will be considered as a new income, which is applicable for tax. For instance, if you owe a loaner 5000$ and you decrease it to 4000$, the 1000$ difference is considered as income.
So, does it worth?
With all these risks, does it worth hiring a resolving company?
The answer is YES. If you don’t want to be filed for bankruptcy, you have to pay your debt anyway. Probably you cannot convince your loaner to change the settlement terms because it wants a sound bargaining skill. With or without a debt resolving company, you have financial problems so that the cost risk can waive. According to a study, debt settlement saves 2.64$ for each dollar you pay.
Furthermore, the study states that over 95% of settlements result in debt reduction. If you are worried about the credit score, we have to say that it is repairable. A good company would offer practical debt management plans and free credit counseling that can be helpful.
If you hesitate after all these explanations, you can get excellent free credit counseling from Enrich financial company. This will help you to decide easier.
Debt settlement vs debt consolidation:
It does not equal the same as debt consolidation. In debt consolidation, you combine two debts to pay one installment with a lower interest. However, in debt settlement, the creditor accepts to adjust your mortgage for a less but lump-sum payment.
Debt settlement is the process of negotiation and changing settlement agreements under new terms. For a successful debt release, you need to have the required knowledge and experience. Since many people are not familiar with laws and conditions, the best idea is hiring a company. An expert and experienced lawyer will advocate you to relieve your debt professionally. Although hiring a company to support is risky, but due to statistics, it is totally worth it. If you are looking for a competent debt settlement company, our suggestion is the Enrich Financial. You can confidently trust them since they have an acceptable rate of customer satisfaction in their history. You can enjoy Mr. Arian Eghbali and his remarkable team’s free counseling at any time.