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Debt Settlement Pros and Cons

Many debtors seeking debt relief consider debt settlement as their primary option. Debt settlement can put a stop to the never-ending cycle of increasing bills and interest rates and allow a debtor to settle the debt in a relatively short period of time. A skilled debt settlement attorney can help you negotiate feasible terms that will allow you to make a fresh start once the debt is paid in full.

Pros

The advantages of debt settlement are numerous; with the services of a debt attorney the amount of money owed can be reduced by sometimes up to 70%. Debt settlement negotiations can also lead to reduced interest rates and late fees, making the debt relief process easier and faster. The debt settlement negotiations minimize the risk of bankruptcy and foreclosure, protecting the debtor from the social and financial stigma of bankruptcy and ensuring that the creditor gets at least part of the monies owed back. When a debt settlement attorney handles the negotiations, the debtor is protected from stress, harassment and potential illegal action by creditors. The process is relatively fast and if the debtor remains current on all payments until the balance is settled in full, his credit report will no longer be affected.

Cons

However, debt settlement has some disadvantages as well. If a debtor attempts to settle his debt without the aid of a qualified attorney, he is likely to run into many complications that can lead him into an even worse situation. Debt settlement requires a lot of leg work and hardball negotiations with companies that are used to dealing with debtors. Depending on how willing they are to negotiate a settlement, creditors can stretch the process out for months before an agreement is reached. This will affect the debtor’s credit rating even more. Once an agreement is reached, the debtor must remain current on the agreed payments – otherwise the creditor can still decide on court action.

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