If you find yourself in a large amount of debt and feel like you cannot get out of it, do not despair. Many creditors can be and are often willing to work with consumers as long as they show a desire to pay off at least a portion of their debt. This is where debt settlement comes in. In a nutshell, this process involves you contacting  your creditor and offering to pay a lump sum to eliminate the debt, while not having to pay back the entire remaining balance due.

Preparing to Negotiate

The ability to settle your debt for a lesser amount also comes with the ability to negotiate with your creditors. If you're showing them a good faith effort and a desire to pay back as much as you can, often they'll be willing to work out a total settlement amount. You may need to explain in detail your current financial hardship as well as provide proof of other financial obligations such as mortgage payments or vehicle payments. Depending on the process, the creditor might also ask to see current pay stubs as proof of your debt versus income. Once you've been able to reach a deal, it's time to settle your debt.

The Settlement Process

In most cases, the creditor will confirm your new settlement amount with you via a letter in the mail. This gives you something in writing showing that if you repay a certain amount, your debt will be forgiven and considered paid in full. The one caveat to keep in mind is that once you've reached an agreement, you are usually only given a certain time frame, sometimes as little as thirty days, to make the final settlement payment. Before you come up with a firm number, be certain you can pay it all at once and before the deadline. If you don't, you will end up back in collections and might even get hit with extra fees.

Disadvantages

While eliminating debt is always a good thing, not everyone is equipped to do so in the form of a lump sum settlement. Most people who are struggling with debt probably don't already have a large amount of money available to pay at once to begin with. For people who need to take out loans or do a cash advance from another credit card just to pay down a different debt, they may be hurting themselves more than helping. If you have money from a trust fund, investments, or other extra money to use towards your debt settlement, this may be a good option, but be careful about putting yourself into more debt when you attempt to settle other debt. For more information, talk to a professional like Vine & Williams Bankruptcy.