When your business debts are piling up and you are in serious trouble, you must be spending sleepless nights worrying about your financial problems and critical business scenario. If your debt burden seems to be getting out of hand, it is best to opt for an effective debt relief measure. Some of the alternatives could be debt consolidation, debt settlement, business credit counseling or finally, filing for bankruptcy.
Debt settlement could be an effective way of getting rid of business debt when no other alternatives seem to work and you are desperately trying to save yourself from filing bankruptcy. Debt settlement involves a reliable company that provides debt relief simply by effectively negotiating with all your creditors and coaxing them into coming to an agreement to accept a lesser amount than the total amount actually due. Debt settlement is definitely not without risks and pitfalls. Let us explore the frequently asked questions before opting for debt settlement.
What is Debt Settlement?
Debt settlement is often referred to as debt negotiation or even debt arbitration. This type of debt relief had originated as a response to the Great Recession which had left several people unemployed and even underemployed. You simply need to work with a reliable debt settlement company that would do the negotiations with your creditors and offer lump-sum payments for settling your debts but definitely for far less amount than the outstanding balance. Debt settlement is a debt relief method where your creditors or lenders would be accepting less money than the amount you actually owe yet they would be treating the debt as fully paid and the matter as closed.
When Does Debt Settlement Make Sense?
There are a few specific situations when debt settlement would definitely make sense. Here are some such circumstances:
- You are unable to pay your bills.
- You are having unsecured debts.
- You are in a position to repay in case your debts are slashed.
- You are considering filing for bankruptcy.
- You seem to be at least five to almost six months behind as far as the payments go.
How Does a Debt Settlement Company Benefit from Helping Me?
A debt settlement company would be negotiating with your creditors and help in reducing your obligation to an affordable amount. For doing this properly the debt settlement firm would require reviewing your entire financial situation including all financial statements and documents. This implies that they would be examining your credit card balances, bank statements, asset reports, and other relevant documents. Then the debt settlement firm would be well-equipped with all information to effectively negotiate with your creditors on your behalf for lowering the amount to be repaid. In such a situation, the debt settlement firm would be making money simply by charging a substantial fee for all the services provided by them. Generally speaking, the fee is determined in terms of a percentage of the actual amount by which your debt load has been lowered. You could browse the Internet for debt settlement feedback from customers so that you could make the right decision.
Is Debt Settlement Legal?
There is absolutely nothing illegal about the entire debt settlement process. In reality, it is one of the hot favorite debt relief measures. But sadly, there are a few scammers who try to take away your money promising to help you erase your debts but they end up delivering nothing as expected. However, most of them have already been compelled to shut down as they failed to comply with the existing federal and state laws.
Why Would the Lenders Accept My Debt Settlement Offers?
Lenders could be coaxed into settling debts once they start believing that you would opt for bankruptcy if the debt settlement offer is declined. Companies holding unsecured debts would fully understand that if you opt for filing bankruptcy, they would end up getting nothing. Your lenders are very smart they can appreciate that your finances are in doldrums and you may be compelled by circumstances to consider filing for bankruptcy. In such a case, your creditors stand to lose everything. They would consider debt settlement as that is a much better option left to them as they would be getting back a substantial portion of the amount you actually owe.
What Are the Drawbacks of Debt Settlement?
As per https://www.huffingtonpost.com, debt settlement is certainly not without cost. Debt settlement could end up damaging your credit score and you may not be in a position to opt for a loan in future. Moreover, some debt settlement agencies ask their clients to completely stop disbursing their bills while the debt negotiation process is on. This practice could prove to be hugely detrimental to your financial health as it could culminate in debt collection efforts, late penalties, and even lawsuits. All these repercussions would be adding to the expenses. Ultimately, any reduction in your debt load actually is supposed to be taxable. For instance, suppose you are having a debt of $1000 and you settle for just $500 then you must report an extra $500 in terms of taxable income during your future tax return.
What is the Biggest Benefit of Debt Settlement?
The greatest benefit of debt settlement is your debts would be reduced substantially and you would not be harassed by the collection calls any longer. Moreover, another big advantage of debt settlement is that it can help you in avoiding the risks and hazards associated with bankruptcy that could prove to be really severe.
You can opt for debt settlement provided you are good at negotiating or you have hired the services of a professional debt settlement company for understanding the complex legal documents. You must have readily available cash for paying the lump-sum. The amount of cash you have is supposed to be the key bargaining tool. Once the lender accepts your offer of a diminished amount, you must organize the money for immediate payment. You must get in touch with an experienced debt settlement company and you need to necessarily examine the credentials of a debt settlement company and then hire their services.