The options available to people who are unable to pay off their debts include entering into a debt management plan, taking a consolidation loan, and in the most severe cases, bankruptcy. Full and final debt settlements are available to those who have a lump sum which could pay off some proportion of the total money owed. Creditors may accept a full and final debt settlement because they may get more of their money back this way, than by selling the account to a collection agency, or by forcing bankruptcy on the debtor. Note that loans secured on assets such as houses or cars cannot be cleared by full and final settlement offers, as the creditor will have the option of repossession in these cases.
Those who get into financial problems, and owe more money than they can afford to repay, can consider obtaining debt counseling. There are various charities and non-profit organizations in most countries which can help people in this situation. Examples include National Debtline and the Consumer Credit Counseling Service.
There are various solutions to debt problems. These include entering a debt management plan, taking a consolidation loan, and, in extreme cases, bankruptcy. People who are in financial trouble should beware of organizations and companies which have a one size fits all solution. Responsible counseling looks all the options that are available, and offers help in budgeting and financial management.
When a person has defaulted on a credit agreement, the creditor has to make a judgement about how much of his money he will recover. There is little point in forcing the debtor into agreeing to make payments which he cannot afford, or forcing him into bankruptcy. Creditors, such as credit card companies will often sell the debt to debt collection agencies for a fraction of the actual amount owed.
If an individual has access to a lump sum, not big enough to pay the entire debt, but big enough to pay a reasonable proportion, they may find that creditors are willing to accept that money and write off the remainder of the debt. This is called a full and final debt settlement. Some collection agencies may call this a short settlement.
Normally full and final settlement offers would not be accepted unless there was some evidence of financial difficulty. This might include being in a debt management plan for some months or years, or having already defaulted on minimum payments.
It is vital that settlement agreements are in writing. Organizations which offer debt counseling will often have sample offer letters on their websites. These may be customized to individual circumstances, and sent to different creditors. It is important to make a fair offer, not favoring one creditor over another. Note that loans secured on assets such as houses or cars cannot be cleared by settlement offers, as the creditor will have the option of repossession in these cases.
It is also possible to hire a lawyer or attorney to negotiate settlement with a creditor, and there are some specialist companies who operate in this field.
You have to go through a debt settlement program if you are having money troubles today. There are some debt settlement pros and cons that we need to share with you all.
- Debt Consolidation Loans Bad Credit (Private-Bad-Credit-Lenders.com)
- Debt Settlement Loans Bad Credit (PBCLenders.com)
- Tips Series: Personal Finance Tips – How Obama Has Helped Consumer Debt Relief Programs (helpwithdebtnow.com)
- Credit Repair After Debt Settlement (creditrepair.org)