3 Reasons Why Debt Settlement Doesn’t Work For Everyone

If you are looking for information on debt settlement and whether it can help cut your debt in half, you will find thousands of articles on the topic right here on the Internet. Unfortunately the information available can range from very accurate to downright fraudulent. There are a few major factors that will determine whether or not debt settlement will work for you that are not always mentioned.

While it is true that creditors are willing to negotiate settlements for less than the balance owed, there are times when a creditor will simply not be willing to consider a settlement. This is one of the reasons debt settlement is such an “iffy” prospect. Another reason to give this method of debt reduction a second look is the fact that most creditors who do settle will want their payment right away. Combined, these issues could be deal breakers for some consumers who attempt to settle debt. For this reason anyone who is thinking about settling their debt should consider the following three things.

• Financial hardship- Almost all debt settlement company websites list this as one of the main requirements before enrolling in their program. The ones that do not, should be eliminated from your list immediately. This is why; credit card companies do not want to negotiate with a person who has the means to repay their debt per the original contract agreement. Even if that means you pay the minimum payment for the rest of your life, they are ok with that prospect. You must prove you are facing a legitimate financial hardship that has rendered you unable to continue making your payments.

• Account history- When it comes time to negotiate, your creditors are going to look at your account history. They will consider how long you have been a customer and what purchases have been made in the past year. Specifically they want to know if you made any large purchases or quickly ran up a huge balance knowing you would not be able to repay the debt. They also want to see how many payments you have already made on the account. They will also look at your current credit use. If you continue to use other credit cards, you are displaying behavior not conducive to a person who wants to eliminate debt. Patterns they see in your history and current spending will indicate whether or not you qualify for a settlement.

• You must pay the debt upon settlement- This is the tricky part and one that many people fail to take into consideration. Whether you are working with a settlement company or negotiating on your own, once the credit card company agrees on an amount, you will likely need to have the entire balance within a few days or in some cases they will accept two, perhaps three monthly payments. You do not get to negotiate 50% off your debt and then take a year or more to pay it off. This means you must have some way to save money for settlements. If you lack the resources or discipline to put money aside for future settlements, don’t waste your time with this process.

Negotiating debt is a legal process to eliminate your debt, however it is not for everyone. Make sure you meet the conditions before going down this road as it is one that can have severe consequences when handled incorrectly.