Is Debt Settlement a viable option? Why may your creditors go for a debt settlement?

Credit card debt can lead to many undesirable consequences, including stress, uncertainty and poor credit. Consumers that are suffering from mounting credit card debt are haunted by creditors, debt collectors and the impossibility of good credit in the future; all of this can lead to mental and emotional stress. It is important to choose the debt relief program in the right way according to individual lifestyle and needs. While there are many viable options out there, the debt settlement should be considered because it really works.

                     

Credit card debt settlement is an innovative form of debt relief where a creditor accepts as little as 40% of what is owed to satisfy a full balance owed. There is one caveat, however. In order to qualify one must be at least four months behind on their payments to their creditors. This also explains why creditors are willing to agree to an arrangement where they're not receiving full payment.

The main reason for this is the last thing that a creditor wants is to deal with the possibility of bankruptcy. When a consumer files for bankruptcy, it means that the debts are wiped away without payment; creditors will not get any of the money that they are owed if this happens. If there is a possibility of no payment at all, creditors are a lot more likely to accept a portion of the debt by coming up with some sort of settlement.

Keep in mind that many creditors who feel that they have slim chances of seeing payment have the option to sell your debt to a "bad debt buyer" for a fraction of the original cost. The creditor loses money on the deal, but still makes out with more than would be afforded because of bankruptcy. The purchaser of the debt will then turn around and negotiate a much lower payment that is more than they paid for the debt and will maximize their own profits. Though everyone else seems to benefit, if just a small amount, the consumer does too; debt is settled for less than was originally owed and is a more manageable option for payment.

Finally, creditors are in some cases sympathetic to the situation of the debtor. It is often thought that creditors are after payment only, having no sympathy for hardships. While this may be true in some cases, it isn't always the case and should not be assumed. Creditors are well aware of the potential that a consumer will not be able to pay off the debt. This is a looming possibility with any transaction and creditors can sometimes be understanding when a consumer can no longer pay, especially for those who have been faithful with payment for some amount of time.

Robert Zangrilli is the CEO of Franklin Debt Relief, a company specializing in debt settlement programs for consumers.