A successful debt settlement is the result of negotiations that take place between a debt settlement company, acting on behalf of their client, and the creditors of that client. Debts that can be negotiated are credit cards, medical bills, department store cards, signature loans, unsecured lines of credit, and revolving debt. Mortgage, auto, and student loans are not eligible for debt settlement.
A debt settlement begins with the determination of the client’s eligibility to participate. The major factor in this determination is hardship for the client. The client then signs an agreement with the debt settlement company that will conduct the negotiation with the creditors and provides statements from the creditors to be included in the settlement.
From that point forward the client makes a single monthly payment to either a trust or escrow account set up by the debt settlement company. As funds accumulate in the account, the debt settlement company will initiate negotiations with the various creditors. These negotiations typically reduce the sum of outstanding debt by 40 to 60%. Depending on how much the client can comfortably pay each month, the time it takes to pay the reduced debt in full can take 18 to 48 months.
A good debt settlement company will make the process seem quite simple, and from the client’s viewpoint it should be that way. The most important thing for the client to do is to commit to the process and see it through to its completion. What is the reward? Freedom from debt, as simple as that.