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Debt Settlement Process

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Debt Settlement is a relatively new and aggressive approach to debt relief and is ideal for consumers that are truly struggling and/or can no longer afford to make their minimum credit card payments. Accumulations of debt can come from many different sources including credit cards, medical bills, department store cards, signature loans, unsecured lines of credit, and revolving debt. In a debt settlement, these debts can be combined into a single process with an immediate reduction of around 50% on the total amount of monthly payments due on all accounts in the plan. Instead of writing checks to a multiple of creditors, a single payment is made to an escrow or trust account where funds accumulate until there is a sufficient level to begin negotiations with creditors.

 

The debt settlement process typically runs anywhere from 18 months to 48 months from beginning to end. The length of time in the settlement depends on the borrower’s ability to pay on a monthly basis. The greater the ability to pay, the shorter the time to settlement of all debts. The length of time to settlement is not the most important issue when setting up the pay schedule, however. What is most important by far is setting a payment schedule that can be maintained by the borrower.   

 

In a debt settlement, the principle amount of the debt is usually reduced by 40 to 60%. This principle reduction, combined with greatly reduced monthly payments and a relatively short time to full payoff of settled debts has made debt settlements an increasingly popular debt relief option.

 

The biggest advantage is that once the client has completed the plan, that client is “paid in full” and debt free on all settled accounts. Depending on the original size of the settlement amount, the savings on interest payments combined with the reduction of principle owed can actually run into millions of dollars when calculated over the typical timeline estimate for paying that debt in full.

To see what a debt settlement could mean to you and your family apply online today.

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