10 Things About Debt Settlement That Your Clients Should Know

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March 14, 2017 | By RGR Marketing Blog

Debt Settlement Can Be a Powerful Tool, One that Can Wreak Havoc on Credit

When the going gets tough and the writing is on the wall – your client is borrowing from one creditor to pay another, or they just don’t make enough to pay more than the minimum on their consumer credit accounts (and are slipping further and further into the hole) – debt settlement can look like a great way to avoid bankruptcy.

The process can save them a ton of money, but it isn’t without its own consequences. Here’s what your clients need to know when it come to settling their debts.

1 – Debt Settlement Is Available for Most of Their Unsecured Debt

Debt settlement is a practice whereby creditors agree to forgive a portion of a consumer’s debt in order to keep them paying at least some of the principal back. Debt settlements can be obtained for just about any debt that isn’t secured by collateral, or guaranteed by a cosigner with assets.

2 – Debt Settlement Can Save Them Tremendous Amounts of Money

Most creditors will practically bend over backwards to help a consumer keep paying some, or any, of their debt. If that means forgiving more than half of the principal and taking partial payments at a lower interest rate, many will gladly enter into settling.

3 – They Don’t Need to Have Filed for Bankruptcy Protection to Negotiate Settlements

In the past, debt settlement was only available to consumers experiencing serious hardship and was often only offered to maintain some accounts as part of a bankruptcy. Today, debt settlement can be obtained on most debt (see above).

4 – Being Proactive in Seeking Arrangements Will Help

Consumers who don’t wait until they are several payments behind, or well over their limit with fees and fines, stand a much greater chance of being able to settle their debt.

5 – Honesty Is Required

The consumer seeking debt settlement will most likely have to prove that they are in a position of hardship and cannot reasonably pay the debt back at the agreed-upon terms. This may require a forfeit of privacy that many consumers are not prepared to accept.

6 - Debt Settlement Will Dramatically Lower Their Credit Rating

While debt settlement is preferable to bankruptcy, as deed in lieu is better than foreclosure and voluntary surrender is preferable to repossession, it isn’t a get out of debt free card. In some cases, depending on the amount of debt being settled, it can lower a person’s credit rating almost as much as some of the more drastic measures.

7 – Debt Management Is Almost Always Preferable to Debt Settlement

Working with a non-profit consumer credit counselor or a government-sponsored program in the area to lower a client’s payments and interest rates can make it possible for them to pay back debt without settling the principal. This will actually improve their credit rating over time, if they make the adjusted payments on time.

8 – Settle the Debts at a Reasonable Payment

Consumers should ensure that they are agreeing to a new payment that they can actually afford to keep up with. Why settle if they won’t be able to make the payment on the reduced amount?

9 – They Can’t Assume That the Matter Is Concluded

Smart consumers will monitor their credit report to ensure that settled debt does not continue to appear on their credit report as unpaid debt. The credit hit they will take for settling the debt is bad enough without the appearance that they have continued to fall farther and farther behind on a debt they assumed was dealt with.

10 – It’s Not About Shame

Many consumers get more wrapped up in the moral or ethical consequences of filing for bankruptcy protection or seeking debt settlement, without concentrating on what’s best for them and their family in the situation.

In Some Circumstances It Makes Sense

Debt settlement, as a last alternative to bankruptcy, foreclosure, or repossession, can make sound financial sense to some. However, as outlined above, it’s not without its consequences and pitfalls. Every consumer’s situation is somewhat unique, but for many, debt management is typically a more productive solution.

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Debt Settlement Can Be a Powerful Tool, One that Can Wreak Havoc on Credit

1 – Debt Settlement Is Available for Most of Their Unsecured Debt

2 – Debt Settlement Can Save Them Tremendous Amounts of Money

3 – They Don’t Need to Have Filed for Bankruptcy Protection to Negotiate Settlements

4 – Being Proactive in Seeking Arrangements Will Help

5 – Honesty Is Required

6 - Debt Settlement Will Dramatically Lower Their Credit Rating

7 – Debt Management Is Almost Always Preferable to Debt Settlement

8 – Settle the Debts at a Reasonable Payment

9 – They Can’t Assume That the Matter Is Concluded

10 – It’s Not About Shame

In Some Circumstances It Makes Sense

Start making more
money today!

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Debt Settlement Can Be a Powerful Tool, One that Can Wreak Havoc on Credit

1 – Debt Settlement Is Available for Most of Their Unsecured Debt

2 – Debt Settlement Can Save Them Tremendous Amounts of Money

3 – They Don’t Need to Have Filed for Bankruptcy Protection to Negotiate Settlements

4 – Being Proactive in Seeking Arrangements Will Help

5 – Honesty Is Required

6 - Debt Settlement Will Dramatically Lower Their Credit Rating

7 – Debt Management Is Almost Always Preferable to Debt Settlement

8 – Settle the Debts at a Reasonable Payment

9 – They Can’t Assume That the Matter Is Concluded

10 – It’s Not About Shame

In Some Circumstances It Makes Sense

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