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You may want to reconsider before opting for debt settlement

On Behalf of | Jul 10, 2019 | Firm News |

Knowing that other people also struggle financially may not necessarily bring you any feelings of relief. After all, solidarity does not make your monthly bills any lower or stop creditors from calling. Still, it may help you to know that you do have options available for effectively addressing your outstanding debts.

Though multiple options do exist, it can be difficult to know which debt-relief route is right for you. Already, you may have certain ideas in mind that seem more appealing than others. For instance, you may think that opting for debt settlement would be better for you than filing for bankruptcy because of the negative stigma associated with bankruptcy. However, did you know what debt settlement is not all it is cracked up to be?

Why might debt settlement not work for you?

To say that debt settlement is completely ineffective is not necessarily true. Still, the possibility exists that it may not work for you. Taking this route would involve you hiring a debt settlement company and that company’s agents attempting to negotiate with your creditors to lower or eliminate your outstanding debt. This action may seem like a beneficial route to take, but it is important to understand that your creditors do not have to work with the settlement company.

In this worst-case scenario, the debt settlement company could contact your creditors in attempts to negotiate only for your creditors to rebuff the attempts entirely, leaving you with your full balances owed. Additionally, if the settlement company required upfront fees, you may be even worse off financially than you were before.

Does successful settlement have downsides?

As mentioned, debt settlement is not necessarily completely ineffective. However, even if your creditors negotiate, your credit report will still have marks to note that charge-offs or write-offs took place. In fact, these marks may stay on your record for up to seven years. Additionally, settlement companies have a tendency to attempt to negotiate lower debts first. As a result, even if those negotiations are successful, your more significant debts are still going unpaid and accruing interest throughout the settlement process.

Should you risk it?

Though the choice of whether to attempt debt settlement is ultimately up to you, you may first want to determine whether another option, like bankruptcy, may better suit your circumstances. Certainly, bankruptcy will also leave a mark on your credit report, but bankruptcy is a proven legal method for addressing debt. Before making any choices, you should speak with a knowledgeable Californian attorney about the benefits and possible downsides of filing for bankruptcy.