Is Debt Settlement the Right Choice?

We understand getting out of debt is hard and we want to help you make the best choice for you. If you can no longer keep up with your credit card payments and a Debt Management Plan does not fit into your budget, debt settlement may be the right choice.

Debt Settlement is a debt relief option for those who can no longer keep up with their payments and want to avoid filing for bankruptcy.

There are many benefits and challenges to consider before enrolling in a Debt Settlement Plan or negotiating with your creditors on your own. Let's take a look at some of the pro's and con's to debt settlement.

Benefits

• Lowers your monthly payment towards debt.
• Reduces your overall amount of debt.
• Potential to get out of debt sooner; typically 3-5 years.

Challenges

• To settle your accounts you will need to set aside money to do so; either on your own or with your debt relief provider. These funds are held in a bank account or escrow until negotiated settlements can be reached.
• Settling accounts has a negative effect on your credit score due to your accounts becoming delinquent.  While settlement may hurt your credit temporarily, in the long run, it's better to get out of debt and avoid the effects of bankruptcy.
• With any type of settlement there is the possibility of tax ramifications on the "forgiven" debt.
• Collection calls due to delinquent accounts.
• Possibility of being sued, wage garnishment, and legal action.

A CareOne Debt Relief Services Debt Settlement Plan

Deciding which debt relief provider you should use to help you settle your debt can be just as difficult as deciding to settle your debt. Doing your homework and research can help you select a provider that is right for you.

• Enrollment process.  CareOne's enrollment process is different from our competitors as we explore all debt relief options prior to enrolling you in a plan. We complete a detailed budget analysis to identify potential areas you could adjust your spending.
• Fee structure.  CareOne's fee structure is based on contingency fees; paid only when a settlement has been reached. This is different than many of our competitors that require full payment up front before they begin to work on your debt.
• Escrow account.  The calculated monthly payment is deposited into an escrow account to use for settlement with your creditors. The sooner your escrow account builds value; the sooner settlements can be made with your creditors.

Debt Settlement is not an easy road

Whether choosing to negotiate with your creditors on your own or with the help of a debt relief provider be prepared for the stresses associated with settling your debt.

• Calls.  Your creditors and collection agencies will most likely call incessantly during the first few months because the accounts are delinquent and they think the best way to get you to pay is to call! If it did not work, they would not do it.
• Threats.  Creditors may tell you they do not accept settlements or that they do not work with debt relief providers. This is most likely not the case; they are just trying to intimidate you into making a payment.
• Settlements.  Typically creditors accept 45 - 60% of the original balance owed to your creditors. While this helps to reduce what is owed it is important to understand the creditors want payment in full when they agree to settle; this is why rapidly building your escrow account is so important.

Debt Settlement is not a quick fix; the process takes time and lots of patience. In order to be successful you must be fully committed to sticking with it. So if you decide debt settlement is your best option be prepared for all that goes along with it.

Suzanne Cramer 

Suzanne is a certified credit counselor for CareOne Debt Relief Services and is a Social Media Specialist. Suzanne supports our Ask the Expert forums as a coach and writes for our A Straight Talk on Debt and Divorce, Debt and Finances blogs. You can also follow Suzanne on Twitter where she shares the latest debt industry news, and tips to keep your finances in check with her @AskCareOne and @ADivorcedMom accounts.