Why Certain People May Prefer Debt Settlement
With debt settlement, an arrangement is negotiated between a debtor and their creditor, where the debtor repays a fraction of the amount owed as full satisfaction for their debt. Once your creditor has agreed, you only clear a proportion of the amount owed, and the balance is cancelled permanently. Many debtors find this approach advantageous in many ways depending on their specific financial circumstances.
Let’s take a look at some advantages of debt settlement to debtors in financial trouble:
Bankruptcy May be Avoided
You may prefer debt settlements with a view to avoiding bankruptcy. While bankruptcy is a viable debt solution in certain cases, it’s a mark that will stay with you for the rest of your life. While your bankruptcy entry is removed from your credit report after 10 years, most applications for work or credit will require you state if you ever applied for bankruptcy. If you lie, and the lender finds out you were once bankrupt, you may be accused of fraud. You could also be fired for not telling the truth.
When you settle debts with your creditors the right way, you won’t have to file bankruptcy or deal with its potentially devastating outcomes. After seven years, your credit report will stop revealing your debt settlement. Again, public records will not show you settling any debts anywhere, and after the credit report time limit for your settled accounts has elapsed, this issue is forgotten forever.
Break From Too Much Debt
Settling your debts with creditors is a practical solution especially if you have valid explanation for not paying back your debts. Once the settlement is paid as negotiated with your creditors, you become free of debt within a shorter duration and at lower costs compared to trying to pay off as per the initially agreed plan.
Another issue is that there many creditors who will prefer this approach to bankruptcy. In many cases, the lenders won’t get much from their debtors even if the filing is under Chapter 13 bankruptcy, compared to the prospects of settling. In case you’re filing Chapter 7 bankruptcy, the creditors have little hope of salvaging anything. Such a scenario is never a first priority to many creditors, so if it’s possible to settle this differently, they’ll listen to offers.
It’s possible to settle your debt obligations in two to four years if you’re on a well-structured debt settlement program. In other words, you can get your finances in order earlier, minus the obligation of monthly or other regular payments.
Settling your debts could be the trigger of your financial liberty. Engage your creditors with a view to settling in a way that resolves your financial circumstances today and tomorrow.