Debt Settlement & Negotiation - Why Would A Creditor Reduce The Debt Owed?

Credit Debt Settlement & Negotiation

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If you successfully complete our program, it’s possible that you’ll enjoy these benefits:
	Settle your debts for less than you owe
	(read here for full details about how much you can expect to save)
	Resolve your unsecured debts in 18 to 60 months
	(read here for full details on how long our program lasts)
	No Up Front Fees - Don't Pay Till You See Results!

One common question asked by consumers who are considering debt settlement is, “Why would the creditor agree to settle the debt that I owe for less?” This is a valid question, and truth be told, creditors prefer not to accept a settlement when full payment is an option and non-settlement is in fact a possibility. However, when full payment is not an option, a settlement is an attractive option for creditors. This being the case, in order for a creditor to even consider a settlement, the debtor must be behind on their payments because once a consumer has defaulted, then the likelihood the full payment is realized decreases dramatically, particularly after more than four consecutive months of non-payment.

For one, many overextended consumers file bankruptcy, oftentimes leaving the creditor with nothing. By not accepting a lump sum of guaranteed money on a delinquent debt, creditors are defying financial lessons that are backed by years of statistical data on past due or charged off debts.

Secondly, the collection costs of pursuing a past due debt can be expensive. Many collection agencies charge a 30% contingency fee for any consumer account and up to 40% if the accounts are forwarded to an attorney for litigation. In other words, in a best case scenario the creditor only gets back 70% of what was owed, and in most cases, since the probability of collecting the full amount on a delinquent account is so low, they receive less than 65% of what is owed because they allow the collection agencies to accept settlements anyway.

In other situations the creditor may sell your delinquent account to a debt buyer, typically for 10-12% of the balance. Compared to the other options on the table, there is little reason for a creditor not to accept a settlement offer of 40 to 60 percent of the balance owed.