Debt Settlement

Debt settlement, also known as debt arbitration, debt negotiation or credit settlement, is an approach to debt reduction in which the debtor and creditor agree on a reduced balance that will be regarded as payment to close the account and not take any further action.

The reason creditors accept less than full payment is because they may wish to remove any further risk of recovering what is owed to them.

However, only unsecured debts such as loans or credit cards can be settled this way – mortgages, hire purchase agreements, tax debts and student loans are excluded.

Advantages

  • You avoid the stigma and intrusive court-mandated controls of formal insolvency
  • You can significantly reduce the amount you have to pay back

Disadvantages

  • Negotiating a settlement is time consuming and can be a frustrating process
  • If your settlement involves only repaying part of your debts, this could have an ongoing adverse effect on your credit rating
  • Any Default Notices or court action taken against you will still remain on your credit file for 6 years from the date they were registered. However, your creditor should mark your debt as ‘satisfied’, so that future searches on your credit file will show that you have dealt with your debt successfully.

Debt Settlement negotiations

In order to negotiate with a creditor or their agent you will need a cash lump sum. Alternatively, there may be a third party such as a family member who would be prepared to help.

If you have defaulted on a credit card or loan payment you may find yourself dealing with the debt collections department of the lender. However, be aware that creditors do not accept all offers made to them and must be convinced that any offer made represents the best outcome for them.

In some instances you could end up dealing with a company that has bought your debt. These companies have bought the debt from the original creditor at a fraction of the outstanding balance and may be prepared to accept less than the full amount owed.

Advantages of negotiating for yourself

  • No fees to pay
  • Control over the negotiating process

Advantages of a company negotiating on your behalf

  • No need for you to engage in difficult dialogue with your creditor/s
  • A better settlement figure can often be achieved for you
  • Debt settlement companies often have established relations with creditors
  • Faster access to creditor decision makers
  • In-depth knowledge of creditors decision process and procedures if your case escalates to legal status
  • Takes the hassle and pressure away from you
Call 0330 400 0481 for a free, no-obligation discussion to decide whether settlement may be an appropriate solution to your debt problem.
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