Personal Debt Relief Through Settlement Programs–When Should Consumers Use A Debt Settlement Plan To Erase Debt Obligations?

Consumers looking for ways to find debt relief have turned to debt settlement program in instances where they are looking for a way to have certain debts either reduced or forgiven, in the hopes of getting out of these debt obligations without missing payments or defaulting entirely on what they owe to certain creditors. However, debt settlement is one of the options that consumers usually take as a final resort for their financial difficulties and is usually not one of the primary debt relief solutions that consumers use to erase the various debt obligations in their life.

Furthermore, consumers who are looking for companies that will offer debt settlement assistance must be careful when they are choosing an organization with which they can work, as there are debt relief services from credit counseling organizations all the way through debt settlement companies that may not have a consumer’s best financial interests in mind and, as a result, could do more damage than is necessary to a consumer’s credit. Also, consumers must understand that there is no guarantee when it comes to working through a debt settlement company to talk with creditors about accepting partial payments or a reduction in the total amount due on specific types of debt.

According to the FTC, when it comes to certain types of settlement on particular types of debts, like credit cards, “there is no guarantee that debt settlement companies can persuade a credit card company to accept partial payment of a legitimate debt. Even if they can…it may be months – or even years – before the debt settlement company negotiates with your credit card company to settle your debts.” For this reason, among others, consumers often need to look at credit counseling or even a debt management plan well before their financial problems become so severe that debt settlement is the only alternative to simply defaulting. Credit counseling options may help consumers better budget and manage their money so that they can repay their debt obligations, while a debt management plan will bring reduced monthly payments for consumers, but will have them meet the entirety of the debt that they owe and, as a result, this may be seen more favorable than debt settlement which works out agreements where a consumer simply pays a smaller amount than what they originally owed a creditor.

Yet, there are instances where debt settlement is necessary since consumers have either missed payments, have gotten themselves in a very difficult financial position, or have seen financial setbacks due to factors outside of their control, like unemployment due to downsizing at their former job. Once again, debt settlement should be a last resort for consumers in a difficult financial position, as simple budgeting habits can be helpful for almost any consumer if they will address their financial problems early and, even in some cases, turn to nonprofit credit counseling agency for guidance in this area.

However, if debt settlement is required consumers need to research the organization they may be working with through resources like the Better Business Bureau or even Google, as there are fraudulent organizations that are looking to collect more fees than they are to provide assistance for distressed consumers. Typically, a debt settlement company will be charged with paying accounts to their creditors, which is done after a consumer has made payments into an account, but debt settlement organizations should not charge fees before they settle your debt and they cannot make guarantees to erase unsecured debt, but can only negotiate with creditors in the hopes of getting a settlement.

Also, consumers need to be aware of settlement companies that may claim to be a government program that will bail out personal credit card debt or advises consumers to cut all their communications with creditors, or again, guarantees that they can settle your debt for mere pennies. Again, debt settlement companies can only negotiate with creditors in the hopes of finding a solution to a consumer’s problems, but consumers may be able to avoid any problems that arise from fraudulent debt settlement organizations by either being proactive early and seeking out credit counseling or debt management assistance. However, if settlement is necessary, proper research on a particular settlement company will also help consumers avoid working with a poor settlement organization and doing more damage than is necessary to their credit.