Many people today are struggling to make the minimum monthly payments on their debts like student loans and credit cards accounts. You may be in this situation yourself right now, and may also be having trouble making your other debt payments each month too, such as your mortgage payment and car payment. You may be considering the option to file for bankruptcy so you can find relief from your debts. This can also provide relief from collection calls and letters you may be receiving as well. Debt settlement, however, should be explored fully first as it often helps many people avoid the damaging consequences of bankruptcy.
What Is Debt Settlement?
Settlement is an option available to you that can help you to make paying down your debts more manageable. Like bankruptcy, it can have a negative impact on your credit rating, but in some cases it may be the best solution. Those who are struggling to pay the minimum monthly payments today likely are seeing the impact of slow payments and late payment on their credit rating now. Without some assistance or a debt payment plan in place, these late payments as well as the negative impact on credit rating will likely continue. By settling your debts, you will effectively work out a plan that may include decreasing the amount owed to your creditors as well as establishing new payment options that work in your favor. Many people are able to set up a plan that allows them to pay down their debts without the need to file for bankruptcy
How Can This Affect Your Credit Rating?
Through this process, you are altering the terms of the credit account you have established with your creditors. Often, creditors also agree to reducing the outstanding balance that you owe. Because you are not paying the full amount owed and are not making payments as agreed, your creditor will report the settlement of the account on your credit report. Further, while the details of the settlement are being refined, you are advised not to make payments on those accounts at all. This will affect your credit as well. However, generally this is a better alternative to filing for bankruptcy. Keep in mind that a bankruptcy may stay on your credit report for up to twenty years.
The fact is that if you can make your minimum monthly payments on your accounts right now but find that it is a struggle, there are alternatives to settlement that you can consider. For instance, debt consolidation loans can help you to roll your debts into an account with a lower monthly payment. However, in some cases a debt consolidation loan would not prove helpful as the payment would still be beyond your ability to pay, or perhaps you don’t qualify for this type of loan. Settlement provides you with an alternative to bankruptcy that can help you to minimize the impact to your credit rating. You can speak to a credit counselor today to determine what your options are and to further discuss the impact that the options may have to your credit rating.
- Four Structured Settlement Questions and Answers (2008taxes.org)
- Know about The Debt Ceiling (THEVAGABONDVOYAGE.COM)