Disadvantages Of Debt Settlement
Debt settlement can be a positive alternative to bankruptcy,
and it can serve as a financial aid to those people
who may have difficulty affording even the lower monthly
payments that result from consolidation. Generally,
debt settlement is not geared towards people who are
only a month or two behind
on their payments. Instead, it is designed to help
those who are over six months delinquent or people who
simply cannot pay off their debts.
Professionals in the debt settlement industry will
work with their clients' creditors to find a debt reduction
plan that will work for both parties. In some cases,
clients can find that their debts have been cut in half
or more. This can save them thousands of dollars in
the long run, and unlike bankruptcy, it allows them
to hold onto their assets.
The Downside of Debt Settlement
While saving thousands of dollars can go a long way
in helping to someone get out of debt, there are disadvantages
of debt settlement that should be considered. The primary
problem that arises from settlement is that it negatively
affects credit scores. Debt settlement can remain on
a report for as long as ten years, and it can hinder
a person's ability to obtain a loan, purchase a home
or an automobile, or even rent an apartment.
The disadvantages of debt settlement do not stop at
credit reports.
There is a chance that one seeking settlement can be
sued by his creditors. If the case does go to court,
there is a possibility that wages can be garnished,
or that the full debt will have to be paid, so settlement
is not something that should be seen as a first option.
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