Two Signs of a Bad Debt Settlement

There is a lot of discussion about the concept of debt settlement, and there are even firms and companies that market themselves as debt settlement firms. In reality, before you get into the process of debt settlement, you need to understand what you are getting into. You also need to understand what makes a bad debt settlement deal or a bad debt settlement company.

Understanding Debt Settlement

Debt settlement simply involves settling debt for less. In other words, you make an offer to a creditor wherein you agree to pay them something, but less than the full balance due. Creditors may agree if they fear they won't otherwise get anything at all, and you benefit because you can avoid bankruptcy but still pay less back than the total due. You can arrange a debt settlement yourself or get help doing it, but either way, you need to be aware of the signs of a bad debt settlement deal.

Signs of a Bad Debt Settlement Deal

There are a few signs of a bad deal you should watch out for:

• The deal isn't in writing: Before you send a single payment for a debt settlement, you need to make sure you have a clear written agreement that specifies exactly what your obligations are and that stipulates that the completion of those obligations will satisfy the debt in full. If, for example, you promise to send $1000 and the creditor promises to forgive the remaining $500 balance, you'll need to have that deal in writing. Otherwise, you might find yourself sending in the $1000 check and the creditor cashing it and then coming after you for the rest, claiming that they never had a deal with you at all.
• The deal seems too good to be true. This is especially important when working with a debt settlement company. While it is possible to settle your debt for less - sometimes significantly less- you need to be realistic as well. A creditor isn't likely to agree to take $100 on a $1000 debt, for example, as it would hardly be worth it for them to go to the trouble for such a small portion of the debt owed.

Getting Help

To ensure you aren't getting a bad debt settlement deal, you need to talk to a lawyer. Your attorney can help negotiate with creditors and can assist you in reviewing any debt settlement deal to make sure that your interests are actually being protected.