There are significant distinctions among the companies offering debt settlement which should be fully understood before consumers finalize any actions that could threaten such devastating conclusions when poorly begun.
Many of the financial professionals working midst debt settlement rather forcibly advise their prospective clients to cut off correspondence with their lenders and curtail their regular bill payments. Obviously, the negotiators in charge of their clients’ debt settlement will have exceptionally greater leverage during their discussions with the representatives of the credit card lenders whenever those same lenders have reason to believe that the consumers either could not or would not satisfy the accounts to which they’ve legally obligated themselves.
In order for the lenders to agree to offer debt settlement at benevolent terms, they need to believe that the borrowers could not afford their payments as currently situated. All the same, this strategy for debt settlement carries alongside the (limited, but still existent) chance that the lenders may strike back by filing claims against the borrowers.
This is a fairly remote threat for most ordinary debtors, whatever the lenders may say, since the legal fees of such actions generally outweigh the funds which may be collected for borrowers who are already cash poor.
Creditors aren’t in the business of auctioning household furnishings, and the financial troubles currently suffocating the United States economy have jammed the court system with similar suits and left the judiciary less apt to side with lending conglomerates against impoverished citizens attempting debt settlement.
However it may disgust the corporate heads, even those debt settlements which forgive two thirds of the account balances are preferable to a protracted legal fight that won’t necessarily guarantee remuneration.
Still, the relatively minimal risk of legal action initiated by the credit card companies isn’t the only risk which debt settlement represent. Borrowers should also keep in mind that, while the money sent to the negotiation company to eventually help fund the debt settlements should be considered safe provided the initial settlement company passed muster when going through recommendations and background checks, the debt settlement accounts aren’t the same as checking or savings accounts and would not be insured by the FDIC in the (exceedingly unlikely) event that trouble should arise.
Furthermore, there shall be a drop to the FICO scores calculated by the three primary credit report bureaus once the lenders send out notification of debt settlements as managed by a debt settlement negotiation company:
independently arranged debt settlements are less likely to injure credit ratings but they’re also far less likely to lower account balances. In the same fashion, borrowers should take the effort to ask each prospective company about the price of debt settlement, but they should not make the mistake of simply choosing the lowest cost alternative:
selecting a cut rate purveyor of debt settlement would be the very definition of false economy. There’s bound to be a somewhat significant expense for the services of any skilled financial professional, but, honestly, these criticisms should be considered next to meaningless when put side by side the enormous advantages which debt settlement propose for American families about to be torn asunder from the weight of their collected burdens.
Better the obligations could be repaid on time without the borrowers having to resort to the artificial mechanism of debt settlement, of course, but, when it’s too late for heads of household to realistically think about normal methods of repayment, debt settlement may be their last and best hope.