Settling Your Debt Is Legal and Beneficial

Many banks have offered consumers extended time to repay their debt, and even lowered interest rates in some cases. But the solution which has caused many to wonder if it could possibly be legal is that of a debt settlement.


Most consumers who find themselves in over their heads fear that their only recourse may be bankruptcy. As debt settlement companies began offering their services as an alternative to this extreme outcome many have feared that perhaps it was too good to be true. Could they actually work with creditors on behalf of those who owed them thousands of dollars and have them accept a lower amount as full payment? Would the law allow such a bold move?

The fact of the matter is that it is not only legal it saves banks and other creditors money they would otherwise lose when those debtors declare bankruptcy. Creditors know and understand only too well that once a person declares bankruptcy, their chances of recouping the money owed them become practically impossible.


Debt settlement companies provide both the debtor and the creditor a valuable service by negotiating terms that will satisfy both parties. Debtors can be offered a reduction in their total debt anywhere from 35% to 75%. When this kind of settlement is agreed upon, it is legal because it creates a new contract between the creditor and the debtor. All former contracts are settled and are no longer in force upon the debtor. The creditor, by agreeing to the settlement also ensures that some of the money in which they are entitled to will be repaid by helping you avoid bankruptcy, which would otherwise leave them without any compensation.


Not all debts can be settled by debt settlement companies because not all creditors will agree to the negotiations. You will also incur additional debt in that you will owe the settlement company - sometimes upfront - a fee for their service. Try to find those which will collect their fee as part of the payments you agree to make. Also, the debt settlement option is usually only for those who owe a great deal of money - usually well beyond $10,000, and who are suffering a serious setback of some sort, such as a job loss, or death in the family. Generally, in order to qualify, you must be behind in payments at least six months. Though debt settlements are legal, in the process, more often than not, your credit rating will be negatively affected.

Talk to a Lawyer

Need a lawyer? Start here.

How it Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you
Get Professional Help

Talk to a Debt Settlement Lawyer.

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you