If you’re in debt or are thinking about becoming so, then it is crucial that you understand the differences between debt relief and debt settlement. In this article, we’ll discuss these differences so that you’ll be better equipped to make a decision that’s best for you.
Debt relief programs are often referred to as “debt consolidation,” but they are not the same thing. These programs attempt to negotiate with your creditors and offer you a lower monthly payment or possibly eliminate all of your debt entirely. Instead of negotiating directly with your creditors, they often work with the companies that your credit card companies are affiliated with.
Bankruptcy, on the other hand, is a legal process in which a consumer files for Chapter 13 bankruptcy. Under Chapter 13 bankruptcy, a debtor’s debts are transferred to the state. Since bankruptcy affects the state’s budget, it’s often considered a way to clean up the mess and pay off unsecured debts for the state. It can have a positive effect on the economy, but it’s generally considered a last resort.
Settlement is when a debt professional negotiates with your creditors to pay off all or part of your debt. This can be the easiest option if you’ve been using a variety of different methods and still aren’t making your payments. There are certain circumstances, however, when settlement isn’t the best option. The reasons why this isn’t the best option include;
Once your debt has been settled, the creditor will continue to monitor your account and contact you about your payments. As long as your creditor is getting money from your account, your interest rates will continue to increase and your debt will remain current. When you’re going through settlement, your creditor won’t contact you until the debt is paid off and your account is current again.
The first time your credit card company contacts you about your debt, be sure to keep a record of the date, time, and who called you. If you feel like a creditor is harassing you, you can report them to the Better Business Bureau and to the Federal Trade Commission. You should also keep a copy of your settlement agreement to remind yourself of what you signed and how you’re doing.
Although debt settlement is a method that works well for many consumers, it is not an approved program by most major credit card companies. If you’ve been experiencing problems paying off your credit card bills, then you may want to consider a debt-relief plan. You should always check with your credit card company before you settle your debts to see if debt settlement is right for you.
In conclusion, there are several methods to consider when trying to find debt relief. Understanding the differences between the two options is important, so that you’ll know what you’re getting into and be able to select the plan that will best suit your needs.