Whether you’ve explored debt settlement services and are ready for a professional opinion, want a closer understanding of exactly what the process entails, or you’re here to learn what debt settlement is, one thing is likely true: debt affects your life in a serious way. For anyone, the first step to making an informed decision about this type of debt relief is knowing exactly what it is.
What is Debt Settlement?
Debt settlement is the process by which an individual who has debt, spouses or individuals who legally share debt, or a business or an organization with debt reaches a legal agreement with one or more of their lenders in order to repay the sum under new terms. Because the goal of debt settlement services is to quickly and affordably relieve as much debt as possible, settling accounts often includes a selection of the following terms, among others:
- Lower principal debt
- Lower interest rate on your principal debt
- Lower lump sum payment to pay your debt in full
- Lower scheduled payments
- Lower, fewer, and/or less frequent fees
- Lower, more frequent scheduled payments
- Higher, less frequent scheduled payments
- Longer repayment period
- Shorter repayment period, after which remaining debt dissolves
This is not an exhaustive list of possible terms, and it’s hard to say with certainty that a specific creditor will agree to your desired terms. However, many creditors often approve three general types of terms: a lower principle, a lower interest rate, and one or more time-sensitive payment arrangements. In particular, you can expect a lower principle, as this is typically what made your debt impossible, or nearly so, for you to pay in the first place.
Types of Debt You Can Settle
Regardless what debt settlement services you use, the types of creditors you negotiate with, and the terms on which you agree, the general rule is that you can settle unsecured debts but not secured ones. A variety of unsecured debt types are settled to provide debt relief, including:
- Credit debts
- Medical debts
- Business debts
- Personal loans
- Collection debts
Secured debts that cannot be settled have underlying assets pledged as collateral. They include residential and commercial real estate loans, auto loans, government loans, federal student loans, and taxes. Gambling debts, legal verdicts, and child support debt are also excluded.
Contact Liberty Debt Relief Today
You may have heard it’s tough to settle with creditors, but your outcomes greatly depend on your unique situation and the debt settlement services you use. At Liberty Debt Relief, we’ll review your financial and credit history and discuss your options with you. If debt settlement is the best course of action for you, we will work with your lenders directly to potentially lower the amount you owe. Contact us for a free consultation.