Settling credit card debt is a method that has become more common in the past decade. It is traditionally used as a last resort before bankruptcy, but more than ever people are using it to get rid of debt quickly and to stop the collection process. The negotiation can be performed by you or you can hire a service to do it for you. There is a lot to be considered when it comes to debt relief through debt settlement.
Debt settlement is a process of negotiation with the lender where they allow you to settle a debt for less than what is owed on it. For individuals who have an overwhelming amount of debt that they cannot afford to pay in full or debt that has not been paid in six months, this may be their best debt relief choice. It can help them find relief from debts that they would not otherwise be able to pay in full.
If you decide to go with this alternative, you should negotiate on your own and avoid using a service. Services can be expensive and many of these companies are not known for being reputable. What they are doing for you, you can do for yourself. Just call the lender and let them know that you would like to settle your account. If you are current, do not expect them to negotiate with you. Some lenders will negotiate as early as 3 months, but normally it takes 6 months with no payment.
If the lender feels it is the only way that they are going to see any money that is when they will give a figure to settle the debt. You will have to make payment on the agreed upon amount within a short time. It used to be a few days, but some lenders will allow up to 90 days. Get all terms in writing; get a receipt and a release of debt document to complete the process. Make sure that you keep these documents forever. You will most likely need them again.
Debt settlement will impact your credit negatively and you will have to pay taxes on the amount of the debt that is forgiven, but there are still circumstances where this debt relief method may be best for you. Debt is not a one solution fits all scenario. What will work best for you depends on how much debt you have, your capacity for repayment and how current the debt is.