subject: Financial Debt Settlement- Will There be a Catch Towards the Deal Method? [print this page] Financial Debt Settlement- Will There be a Catch Towards the Deal Method?
Debt settlement is definitely a preferred alternative to filing for bankruptcy keeping in mind the long term implications of filing for bankruptcy and considering the amount of time that it can take to clear off your debt. Settlement involves negotiating with your creditors to reduce the amount of debt to be paid back in return for a one time settlement of remaining dues. Debt settlement should ideally be carried out with the help of debt settlement experts who can help you to procure the best deals with their knowledge and experience.
The amendments brought in by the Federal Trade Commission (FTC) to the Telemarketing Sales Rule (TSR) prohibiting debt settlement companies from collecting advance fees, requiring the companies to make specific disclosures to consumers, prohibiting them from making misrepresentations and extending the TSR to cover the calls that consumers make to the debt settlement companies in response to debt settlement advertising have ensured that there is some semblance of safety in dealing with debt settlement companies. However, there are still a few things to be aware of before taking the plunge towards debt settlement. Debt settlement can spell a mini disaster for your credit score (though the impact would not be as high as long-term defaults or filing for bankruptcy). Creditors generally open up to negotiations only when they are sure that there is no other way to recover even a portion of the amount they have lent you. This means that you would need to default on your debt payments for a few months to even get them to sit up and take notice of your negotiation. Meanwhile, late payments and defaults get reported to the credit bureaus by your creditors, your credit score drops, and you might begin receiving collection calls. Also, when you settle a debt, the creditor is being forced to recover less money than what is actually owed. Creditors tend to report this to the credit bureaus as "settled for less than owed" or Charged-Off Settled." This will be a blotch on your credit record for the next seven years and can be viewed by other potential lenders, making it difficult for you to procure a loan in the future.
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