Is Debt Settlement Moral?

Debt Settlement Ethics

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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!

This is a question posed by many consumers who are considering debt settlement. For consumers who are truly overextended to the point where making the minimum payments is impossible and no alternative is available except bankruptcy, debt settlement is one of the most honorable and ethical debt relief options available. In this situation, both the creditor and consumer benefit.

As one would expect, however, some consumers who are considering debt settlement are in much more ambiguous financial situation. That is, it is unclear whether they can reasonably afford to pay the debt back in full, and even if they are able to, they are not sure whether it is in their financial best interests to barely pay their minimum credit card payments for ten years before finally achieving debt freedom.

There are several schools of thought on this topic.

School 1: I need to protect my financial self-interest. I’m just playing by the rules of the credit card companies.

The interest rates and late fees charged by credit card companies make this a difficult argument to contend with. Some credit card interest rates go as high as 32 percent if you’re perceived as a credit risk, which for all intents and purposes, makes becoming debt free difficult for consumers with high debt loads and low payment thresholds. Another point that solidifies this outlook relates to the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005, which was largely influenced by aggressive lobbying by the credit card industry. Widely regarded as a blow to consumer protection (despite the name), BAPCPA is the latest example of a mammoth credit card industry taking advantage of its access to important legislators to protect their financial self-interests. This being the case, it is only fair that consumers do the same.

School 2: I took out the money. I need to pay it back according to whatever terms I agreed to originally.

Ultimately, every consumer is responsible for the decisions they make in the market place, and our financial system depends on consumer accountability if it hopes to be sustainable.

Important Questions to Determine the Morality of Debt Settlement in your Situation

1. Is your consideration of debt settlement as a debt relief option the result of an unexpected hardship? Being in a state of hardship is broadly defined and includes a range of financially catastrophic events like divorce, reduction in income, medical bills, or anything else that may have caused someone to incur debt and not be able to pay it back. If your situation is the result of a hardship, then using debt settlement as a way to rebound is an ethical solution.

2. Did you have the intention to pay the creditor back in full when you borrowed? If the answer is “no”, then obviously using debt settlement would be an unethical act.

3. Have you explored your options? For many consumers seeking debt relief, there are few alternatives available that can alleviate their situation. However, if a solution does exist that can ameliorate your debt problems while allowing for full payment to the creditor, perhaps that is the more ethical avenue for you to pursue. One such option may be credit counseling, where you pay back the debt in full at a reduced interest rate. To speak with a credit counselor, follow this link: http://www.franklindebtrelief.com/credit.html