Our Featured Question & Answer of the Day For Sunday
Q. What is "Debt Settlement?"
A: Debt Settlement is when your creditors agree to accept a lump sum payment for less than the actual balance due. In simple terms, it means your creditors agree to take less.
It is accomplished by negotiating with your creditors. The IRS as well as some creditors, refer to Debt Settlement as Debt Forgiveness, Settlement in Compromise, or a Negotiated Settlement.
Occasionally, a creditor may agree to accept a lesser amount and will allow the settlement to be paid over time, by making monthly payments. This is very rare as most of the time in order to obtain a favorable settlement, it must be paid in full and typically within 10 days of reaching an agreement.
If a creditor does agree to a settlement and allows you to make monthly payments, it is generally a short time-3 months or so, and results in high monthly payments. On rare occasions, a creditor may allow the balance to be paid over 1 year, but this is rare.
Monthly payments on settlements seldom occur when accounts are placed with 3rd party collection agencies or attorneys as they require immediate lump sum payments. Collection agencies often do not have the authority to accept monthly payments on a settlement. However, in a few rare cases, a collection agency may agree to a settlement amount if approved by the original creditor and allow the balance to be paid over time; however this is even more rare.
In short, the best settlements occur when cash is available to immediately settle the account. For this reason,most debt settlement programs are based upon your setting aside funds each month so you accrue funds and the Certified Debt Specialist has money to offer your creditors a lump sum settlement. This is done on a first come – best deal - first serve – basis. |
