Debt settlement programs have helped many consumers erase various forms of debt and find affordability through these plans, which can essentially lower the amount that a consumer must meet when repaying multiple debt obligations that have become problematic for a particular consumer’s financial situation. The while debt settlement is often confused with debt management or other forms of credit counseling, a debt settlement program is usually the final step in a process where a consumer has attempted to find relief but has been unable to settle accounts for the total amount that is due.
Typically, a consumer who is having problems meeting multiple debt payments may contact a credit counseling agency who will then set up a meeting and review a particular consumer’s financial situation. In many cases, a credit counselor is able to look at a consumer’s income versus what they owe, remove the areas where wasteful spending is present, and generally help formulate a budget that will allow them to meet various debt obligations like credit cards, mortgage payments, or personal loans.
However, if this option is unavailable for a consumer, a debt management plan may be formulated in which a consumer is able to pay less than they owe on their minimum monthly payments, by setting up a payment arrangement that will allow these consumers to meet a more affordable monthly plan, but essentially requires they will repay the entirety of their debt. Yet, consumers who cannot benefit from credit counseling or a debt management plan typically must turn to a debt settlement program which is an agreement between a consumer and creditor, typically managed through a counseling agency, where a consumer will pay less than the agreed-upon amount for various debts but will be forgiven of these obligations after the conditions of the debt settlement are met.
Luckily, new rules have upfront banned fees that may be charged through a debt settlement company, as many consumers who are in a position where debt settlement is necessary to have felt further burden through these costs which have been applied by settlement firms. These new debt settlement rules which were passed last year forbid debt settlement companies who either call a consumer or have a consumer call them from charging these individuals any fees upfront, as fraudulent organizations would require that certain costs be met before any help was even offered.
While face-to-face debt settlement agreements are exempt from this rule, many consumers who research debt settlement companies typically call these organizations or may be contacted by a company that could provide help for their situation. For this reason, consumers have been able to avoid upfront telemarketing fees and, as a result, have only had to meet debt settlement costs after an agreement has been worked out with their creditors.
Yet, consumers who may be considering debt settlement are often advised to research either a debt management plan or simply speak with a credit counselor as debt settlement can hurt one’s credit score since they are essentially not paying off the entire amount they owe to various creditors. However, it’s understandable that some individuals have had a difficult financial situation arise in their life which has necessitated the settlement programs, so a great deal of research needs to be conducted by consumers so that they can find a debt settlement company who is accredited and reputable in order to gain the most benefits without incurring excessive costs.