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Commonly Asked Questions about Debt Settlement Agreement

Debt Settlement Arrangements provide for the agreed settlement of debts in the case of people who have unsecured debts and have no prospect of being able to pay off their debts in the next 5 years. You may opt for a DSA if you have secured debts as well, but your secured debts will not be covered by the DSA.
Debt settlement pros and cons ProsCons Might be able to settle for less than what you owe Creditors might not be willing to negotiate Pay off debt sooner Could come with fees Stop calls from collection agencies Could hurt your credit Could help you avoid bankruptcy Debt written off might be taxable
Start by lowballing, and try to work toward a middle ground. If you know you can only pay 50% of your original debt, try offering around 30%. Avoid agreeing to pay an amount you cant afford.
Sometimes known as debt relief, debt settlement occurs when you and a creditor agree to settle debt for less than what you owe. That settlement can involve reducing the principal amount in exchange for a lump-sum payment or decreasing the interest rate.
If youre behind on your credit card payments and looking for a solution, you might be considering debt settlement, which promises to help clear your debts. However, debt settlement is risky and should be a last resort for most borrowers.
And, in addition to saving you money, the debt settlement process also benefits you because settled debts are considered paid or resolved from the lenders perspective, whereas unpaid debt can lead to charge-offs, collection efforts and potential litigation.
Debt settlement is a means of reducing or eliminating unsecured debt by negotiating an agreed-upon payoff amount with creditors or debt collectors. This usually doesnt occur if a debt is secured since the lender will have the right to take the property that secures the loan in lieu of payment.
Debt settlement may enable you to avoid filing for bankruptcy which may put you in a better financial spot. But keep in mind that settling your debt is never a guarantee.