Why Settlement Works With Your Creditors

There are a number of questions consumers frequently ask regarding the debt settlement process- what do you do, how does it work, and certainly, how much does it cost? In addition, there is always the question that looms in the background, and rightfully so. That question is: why would my creditors want to even agree to reach a settlement if I owe this much money? In essence, it is a good question that anyone seeking out debt relief should consider before making the decision that debt settlement is the best option for them. Taking a step towards relieving your financial hardships is a big one, and being comfortable with the decision you make when selecting the best debt relief option is essential. To help consumers understand why creditors are likely to accept offers from a debt settlement company, I have compiled a short list that should be taken into consideration.

1. The threat of Bankruptcy.
Bankruptcy, specifically Chapters 7 and 13, are another debt relief option that many consumers facing severe financial hardships consider. The creditors know this, and they don’t like it. The reason this makes any creditor feel uncomfortable lies in the fact that if a client files for Chapter 7 bankruptcy, their debts are paid off with the funds generated from the sale of their non-exempt property. As a result, often times the creditor sees no money at all, not even a portion of what you owe. If Chapter 13 is filed, then the client is set up through the court on a monthly installment plan. However, there is no guarantee that they can complete the program and pay off the outstanding debt. In essence, the creditors would rather see some of their money rather than no money at all. It makes sense.

2. The Hardship factor.
For many consumers, being in debt does not necessarily mean that the debt itself was a result of an irresponsible spending binge or an extreme lack of financial management. Many consumers in the real world face any one of a number of hardships. They may include medical bills for a serious injury or medical condition, getting laid off of work, or having your business tank. These hardships, if documented with your debt settlement company and/or creditor, will be taken into account for by your creditors and will likely help trigger a low settlement. If you are indeed suffering from a hardship, make sure you explain your situation to the settlement company you are working with during the qualification process.

3. They want your money!
Whether it is all of the money you owe, or only a portion of what you owe, creditors will often times take, or settle, for whatever they can get. Remember, it is a business on their end as well, and not collecting at least a portion of what you owe only hurts that business. The evidence of this lies in the fact that there are hardly any creditors who are unlikely to settle at all. Even the toughest creditors in the industry will settle for 70% of what you owe. While this isn’t typically what a debt settlement company targets, it is beneficial for the client to save anything they can in these situations. In addition, negotiators often times are working with accounts that have been sent to collections. This is beneficial for the negotiation process because these collection agencies and bad debt buyers purchase your debt from the original creditor for pennies on the dollar. As a result, settling for a low percentage of your debt still nets them a large profit.