subject: Credit Debt Settlement Programs - When Does Getting A Debt Settlement Make Financial Sense? [print this page] Credit Debt Settlement Programs - When Does Getting A Debt Settlement Make Financial Sense?
Credit card debt settlement programs have overthrown the traditional method of bankruptcy filing which was once used as the sole method of eliminating debt. The reason why there was no competition is that the consumers were not aware of the settlement process despite the fact that settlement was present right from the beginning. The consumers were unaware of the fact because the creditors never informed the consumers of this method with the hope that they consumers will pay back the entire money in full once they are threatened by collection calls. However, the recent economic disaster because of recession has forced the creditors to accept settlement deals because with the ever increasing number of bankruptcy filings, the creditors failed to get back their money and incurred a huge amount of loss.
Now debt settlement is not for everyone. There are some situations where the debt settlement will not work for the consumers and thus, they will have to look for other alternatives. The best thing that the consumers can then do is to go for debt management or debt consolidation. However, there are several situations when debt settlement makes financial sense. The situations are mentioned below:
If you have a massive amount of debt (over $10,000), it is beneficial to go for debt settlement. This is because of the fact that this amount of debt is considered to be unmanageable and if you are taking some other method for relief, it can take you years to come out of the debt. The easiest method in this situation is the method of settlement as it can earn a waiver of 50% and you can do away by paying only the rest without losing credit score.
If you have an income level higher than the minimum expenditure level mentioned by the government, you will not be able to file for bankruptcy and in that situation, it is better that you go for settlement. Debt settlement will then make financial sense.
Finally, if you have a constant source of income, settlement makes sense. This is because of the fact that once a certain percentage of the debt is waived off by the creditor, the remaining amount is to be paid in bulk. For bulk payment, you will need to have ample money. You need to accumulate this money during the period of settlement. A settlement process generally takes 1-3 years to complete and you will have to actually keep saving money to accumulate at least 50% of the debt.
These are the conditions of situations when opting for debt settlement as a method of debt relief makes financial sense and is considered to be a wise decision.
With the new FTC laws recently passed, debt settlement is a legitimate alternative to filing bankruptcy. Creditors are ready to negotiate and now you won't have to pay a fee unless your debts actually settle.
