Consumers have turned to debt settlement plans in the past as a way to settle various debt obligations for less than they owe due to the fact that they may be in a financial position that does not enable them to continue meeting payments that were, in some cases, previously easily met. Obviously, individuals who have suddenly come upon a situation where they have lost their job or saw a great reduction in their income have struggled to repay current debt obligations that were, up until they were unemployed, easily met and some of these men and women have simply had to seek out debt settlement since they cannot pay the full amount to their creditor.
Consumers who may simply be purchasing more on credit, for example, than they bring in or who are continually using one form of credit to pay off debt from another creditor are usually in a situation that may require some form of intervention with a credit counselor, debt management program, or debt settlement agreement. Again, each individual’s financial situation may be different and could necessitate that alternative measures be taken outside of a debt settlement plan when various sources of debt obligations begin to build and seem insurmountable due to a consumer’s financial position.
While, again, some forms of debt trouble has been the direct result of factors outside of a consumer’s control, like unemployment, but there are men and women who have simply practiced poor financial habits and, as a result have found that they are in no position financially to repay their debts as they may have maxed out lines of credit simply trying to stay afloat. However, there are financial advisers who warn against rushing into debt settlement immediately as there are alternative options that may be more helpful for consumers and could cause less problems in term of a consumer’s credit score than debt settlement.
Nonprofit credit counseling or a debt repayment plan could offer more affordability for an individual struggling to repay various debts and may cause less damage to one’s credit score than debt settlement. Credit counseling can offer assistance in terms of implementing a household budget and erasing debt in a timely manner, while debt repayment plans can be structured between consumers and creditors where a reduced amount is paid through a counseling agency, but no debt is forgiven and thus a consumer’s credit score is not negatively affected.
Debt settlement can cause problems in relation to one’s credit score as their credit report will show that they were unable to repay money they borrowed and after a certain amount of debt is forgiven through a debt settlement plan, the amount forgiven may be taxed, so consumers need to explore alternative options before turning to a debt settlement agreement. However, for those who have exhausted credit counseling or debt repayment options and have come to the conclusion that debt settlement is their only option, doing a great deal of research on organizations that can implement these settlement agreements is also vital due to the fact that there are some companies who have created more financial trouble for consumers by either not properly working with creditors or not making payments to these creditors in a timely manner.