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Is debt settlement the right option for me?

People find themselves in debt for a variety of reasons. When hit with unexpected bills due to an illness, or unable to pay daily bills due to job loss, credit cards may be the only way to make ends meet. It may be the best short-term solution, but debt can rack up very quickly, especially with high interest credit cards. Suddenly, you may be faced with an amount of debt that seems insurmountable. When that happens, there are different debt relief options to consider and which option is best for you will depend on your specific situation.

Various companies advertise help with debt consolidation or debt settlement. However, most often, it is beneficial to have the advice, guidance and assistance of an attorney experienced in debt relief matters if you are finding it difficult to keep your head above water financially. One initial question debtors (people in debt) often have is what is debt settlement and is it better than bankruptcy?

What is debt settlement?

Debt settlement is a negotiation with creditors and lenders on the debtor's behalf for a lower payoff amount than originally owed on the debt. This may be on credit card debt, medical bills and other types of personal loans. Through negotiations, the creditor agrees to forgive a portion of the debt and settle for payments on a lower total. This amounts to a lower monthly payment that may be more manageable to pay.

Pros and cons

There are some benefits to pursing settlement of debt, which should be considered along with your personal and financial situation. Some pros may include:

  • The reduced debt amount may save thousands of dollars.
  • A shorted repayment time may result in funds being freed up more quickly than without the settlement.
  • Typically, harassing calls from creditors stop during repayment.

There may also be some cons to be aware of if considering debt settlement, such as:

  • Only unsecured debts can be a part of a debt settlement agreement (for example, this would not include your mortgage or car loan).
  • Financial hardship may make monthly payments of any kind difficult.
  • In some circumstances, the amount of money saved through the settlement may be considered taxable income.

While there are certainly benefits to debt settlement, it should also be noted that it is not the right option for everyone. There are situations where bankruptcy would be a better fit, particularly, if you have mainly secured debt.

It is important to make sure you pursue the relief option that would be the most beneficial for your situation. For that reason, it is crucial to speak to an attorney knowledgeable in all types of debt relief matters. A debt relief or consolidation company may not have your best interests at heart, or the background to advise you on your best course of action.

Contact the Law Office of Robert C. Nisenson, L.L.C. at 732-518-8038 for a free consultation. Mr. Nisenson will discuss your personal situation and advise you on the best type of debt relief to meet your needs, be it debt settlement, bankruptcy or other options.

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