Avoid Bankruptcy with Credit Card Debt Settlement
Debt settlement is just one of numerous ways to climb out of debt. Debt consolidation and
credit counseling are both preferable to debt settlement, but debt settlement may help you
avoid bankruptcy or foreclosure if your situation is very serious.
Unfortunately, sometimes it’s not possible to repay your debts in full. If you’ve suffered an
extended job loss, an expensive medical emergency or illness, or a death in the family, you
may not be able to recover from the debt created by the situation. Rather than file for
bankruptcy, which will ruin your credit for 7 to 10 years, you could try debt settlement first.
How Debt Settlement Works
You have the option of settling your debt yourself, but you’re more likely to be successful if
you hire a professional debt settlement service to handle your paperwork and negotiations. A
debt settlement company will review your debts and determine which are most likely to be
settled. Credit card debt settlement is the most common form. Medical debts are often
negotiable. Student loans are not negotiable and mortgages are almost never negotiable.
When you apply for debt settlement, the service will review your accounts and then contact
your creditors to negotiate a settlement. Settlements are typically for 30-50% of the balance,
but can be as high as 75-80%. In rare cases, your settlement can be as low as 20%. A reputable
debt settlement service won’t guarantee a specific rate and won’t offer “credit repair” services
in addition to the settlement.
The settlement process can take anywhere from a few months to a few years, depending on the
level of your debt. Some services ask you to make debt payments to their escrow service or ask
you to set aside the money yourself. Some services require lump sums to pay off negotiated
debts while others let you pay over time.
Credit Card Debt Settlement and Your Credit Rating
Debt settlement will affect your credit rating. Your creditors will report your accoun