When Should You Seek for Debt Settlement?

When to consider debt settlement and how to choose the best debt settlement company

Debt settlement can have significant benefits Depending on your finances, but there are some considerations that could mean it’s not the best option for you. Using debt settlement as a means of negotiating unsecured debts has benefits but also some drawbacks to be aware of.

One of the most common types of debt in America is unsecured debt, particularly credit card debt, which can create incredibly difficult financial situations. Debt settlement may be a way out, but there are drawbacks to weigh against the benefits. Getting the debt help you need doesn’t have to be complicated. We’ll highlight the most important information you need to consider for escaping your unsecured debt headaches.

Reasons Debt Settlement May Be For You

Avoid Filing For Bankruptcy

Filing for bankruptcy has more severe and lasting consequences than just about any other financial decision in someone’s life. Avoiding bankruptcy is crucial but is sometimes the only option for getting help with debt.

The effects of bankruptcy on your credit can last up to ten years, making it very hard to buy a car or a home. And even though Chapter 7 bankruptcy can wipe debts away and for a fresh start, you may have to give up some of your assets like your car or motorcycle to repay some of the debt.

A less severe option to bankruptcy is debt settlement, but everyone’s financial situation is different, so getting advice from debt relief experts is wise before making a decision. A key benefit of debt settlement over bankruptcy is that debt settlement allows you to keep your assets while still reducing consumer debt balances to levels they can manage.

Stop Harassing Collections By Creditors

Harassing phone calls and letters from collection agencies and credit card companies is embarrassing and frustrating. Debt settlement programs from Alleviate Financial provide the financial debt help needed to end the harassment from your creditors.

Pay Off Unsecured Revolving Debt Sooner

The credit debt company specialists at Alleviate Financial negotiate a new payment schedule to get your debt fully paid off, usually in three years or less. New interest charges will be suspended, providing you much-needed breathing room for your payments to have more impact in reducing your debt balances.

Debt Balance Reduction

Credit debt relief has the primary benefit of reducing debt balances that have grown to unmanageable amounts, making it possible to become debt-free in less time. Seasoned credit card company negotiators at Alleviate Financial know the most effective strategies for setting your debt, reducing your unsecured balances, and creating a plan for repayment that works for you. It’s not uncommon for our clients to save thousands with debt negotiation.

Enrolling in a debt relief program from Alleviate Financial puts professional debt negotiators on your side, so you have a fighting chance against your creditors and credit card companies. Our experienced team negotiates with your creditors on your behalf to slash your high fees and interest charges from your balances.

Reasons Debt Settlement May Not Be Right For You

The benefits of debt settlement are many. However, there are a few drawbacks to debt settlement to keep in mind before moving forward with the process.

Your Credit Score May Drop Temporarily

Debt settlement programs may remain on your credit report for as long as seven years. With that said, it’s far better to have accounts listed as settled for less than the full balance than never paid off at all. A zero balance on a credit report is the ideal goal, and debt settlement accomplishes that.

After the debt settlement is fully paid and the accounts are closed, establishing timely credit payments on new accounts will have the most positive effect for rebuilding your credit and boosting your score back up. This process is still much faster than recovering from a bankruptcy.

Tax Implications

If your creditors settle your debts for considerably less than you owe, they may send you a form 1099-C, which essentially states the written-off debt as income to you. If this happens, you’ll have to file that with the IRS, and that could result in paying higher taxes.

Creditors Don’t Have To Participate

A key consideration about debt settlement is the fact creditors aren’t legally required to participate in the program just because other creditors do. However, if other creditors are on board but they aren’t, they fully realize it’s likely they may never get paid while others do, and that often encourages them to join along.

Costs Of Debt Settlement Services

Also, remember that experienced professionals who are passionate about helping people can’t work for free. Debt settlement companies that get real results for their clients will charge a fee for their service once an agreement between you and the creditors is satisfactory to you. Debt settlement companies won’t ask for up-front payment.

While you certainly aren’t barred from settling your debts on your own for free, help from experienced debt settlement experts is often well worth their fee.

What’s The Debt Settlement Process Like?

The debt settlement process begins as a negotiation between you and your creditors. If you’re getting help from debt settlement specialists, they will handle this process on your behalf to ensure the best possible deal is made.

While negotiations are going on, you’ll set up a dedicated savings account to use for leverage in the negotiation. Payments to the creditors will be drawn from this account.

When funds in the savings account reach a sufficient level, the negotiators at the debt settlement company will deal with the creditors to accept a repayment plan on reduced balances, with fees and penalties slashed and new interest charges suspended. 

Once your debt settlement is fully paid off, your credit report will show zero balances and may state the accounts as “settled,” and the next step will be re-establishing credit with strong repayment habits to boost your credit score back up.

When you’re ready to start the debt settlement process for a brighter financial future, contact the seasoned professionals at Alleviate Financial to get the best debt negotiators on your side.

Contact Alleviate Financial today for expert debt settlement assistance.

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