Debt settlement (also known as debt elimination) deals with unsecured credit only. Settlement may be negotiated by yourself or third parties. Debt settlement reduces creditors’ harassments. Debt settlement involves paying 30% to 70% of delinquent your debts. Full disclosure of your financial affairs is required by your creditors. Based on that disclosure, your creditors determine the settlement amount they are willing to accept to relief you from your debt obligation.
Debt Settlement has a few prerequisites:
- Unsecured debts must be four or more months in arrears (settlement is not an option on secured debt is such as a car or a house).
- A lump sum amount of cash is required to make a final payment on an agreed amount for settlement. It is rare that installments will be accepted in this circumstance.