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When is Debt Settlement a Good Option?

July 23, 2021

Frustrated woman working on her finances at a table According to a recent Economic Impact of the Debt Settlement Industry report, debt settlement companies helped reduce the debit balance of consumers from $5.1 billion to $2.5 billion in 2018. Debt settlement is just one of a few different debt relief options that can help individuals who are experiencing significant financial distress. It involves working with a debt settlement company that will contact your creditors on your behalf and negotiate a reduced payment plan.

Working with a debt settlement provider involves understanding the benefits and drawbacks involved. At Simmons & Greene, P.C., we have extensive experience assisting clients on a variety of different legal matters related to debt relief, including the option of debt settlement.

With a team of experienced Arizona debt relief attorneys, our firm can evaluate your unique financial situation, help you understand your debt-relief options, and work with you to determine whether or not debt settlement is the right option for you. Our team will guide you through every phase of the legal process and answer all of your questions along the way. We proudly serve clients across Phoenix, Scottsdale, Chandler, Peoria, Glendale, and Mesa, Arizona — so call today to learn more about how we can help you find relief from your debt.

What is Debt Settlement?

Debt settlement can be described as an agreement to reduce the balance a creditor will accept by making a lump-sum payment. This method of debt repayment involves settling your debts for less than the full amount owed by offering huge lump sums to the creditor. If you choose to utilize this method, you can hire a debt settlement company to reach out to your creditors and work to negotiate a reduced payment on your behalf.

How Does Debt Settlement Work?

Debt settlement companies work directly with consumers going through financial distress to negotiate settlements with their creditors for less than the amount owed. The idea is that the creditor may accept a reduced lump-sum payment rather than allowing the borrower to declare bankruptcy.

When it comes to debt settlement, you (the consumer) will stop making payments on your debts. In exchange, you will make monthly payments into a savings account until there's enough of a lump-sum amount that you can pay to the debt settlement provider to negotiate with the creditor. If the debt settlement program is successful, you can reduce your debt by up to 50%.

When is Debt Settlement
a Good Option?

While there are other debt-relief options, there are instances where working with a debt settlement company may be an ideal option for you to achieve financial relief. Some of the advantages to opting to work with a debt settlement company include:

Pay Off Your Debts Fast

Debt settlement is a good option when you want to pay off your debts fast. If your debt settlement program is successful, you can eliminate your debt more quickly compared to making regularly scheduled payments over time.

Avoid Bankruptcy

As mentioned earlier, the idea of debt settlement is that the creditor will likely accept a reduced lump-sum payment to prevent the consumer from filing bankruptcy. Should the debt settlement process be successful, the consumer can get out of debt quickly and may not need to petition for bankruptcy.

Reduce Your Overall Debt Amount

Settling your debt through a debt settlement provider can help reduce the amount of debt you will end up repaying. If your debt settlement program is successful, you may be able to settle your debts for less than the full amount you owe.

How Will It Affect My Credit?

Unfortunately, debt settlement can hurt your credit score. The debt settlement company may require that you stop making payments on your bills and put your money into a savings account while they help you negotiate with the creditor. Such missed payments will show up on your credit history. Since you won't be repaying your debts in full, choosing the debt settlement option may eventually bring down your credit score.

How an Experienced Attorney
Can Help You Avoid Pitfalls

Repaying massive amounts of debt can often feel overwhelming. Working with someone to negotiate with the creditor on your behalf can help reduce that burden. However, before using a debt settlement company, it is essential that you understand the risks and benefits of choosing to work with a debt settlement company. Consulting with a knowledgeable debt relief attorney who can evaluate your financial situation and advise you on the best course of action is always a wise decision.

At Simmons & Greene, P.C., we are dedicated to providing experienced legal counsel and reliable guidance to clients who are faced with overwhelming debt. Our attorneys are available to discuss your financial situation, educate you about your options to achieve debt relief, and explain both the benefits and the risks of repaying your debts through debt settlement. As your legal counsel, we will guide you through the process step by step, answer all of your questions, and help you make informed decisions so that you can build a strong financial future for yourself.

Contact Simmons & Greene, P.C. today to schedule a one-on-one consultation with our knowledgeable debt settlement attorneys. Our experienced team can offer you the comprehensive legal guidance and reliable advocacy you need to work toward the financial clean slate that you deserve. Our firm is proud to serve clients across Phoenix, Scottsdale, Chandler, Peoria, Glendale, and Mesa, Arizona — so call today to get started on your path toward a debt-free life!