What is debt settlement?
[det set-l-muhnt] v. The process of negotiating with creditors to get them to agree to accept payment that is less than the full amount owed
When someone finds that they are getting deeper and deeper in debt, they sometimes end up in a position where it is impossible for them to meet all of their financial obligations. Debt settlement affords these people with an option other than declaring bankruptcy.
Whether working with a debt settlement company or working to settle debts on your own, the goal of debt settlement is the same; to get creditors to mark a debt as completely satisfied in exchange for a partial payment.
Many people have seen success with debt settlement because lenders would rather receive a partial payment than no payment at all, which is a possibility if you are forced to declare bankruptcy. A major downside of debt settlement, however, is that it typically wrecks havoc on your credit reports.
Debt settlement and your credit reports
When working to settle debts, a consumer's credit score can drop significantly because credit accounts frequently need to be "aged" in order to get the most benefit from debt settlement and because creditors can report to the credit bureaus that debts were settled, which is a very negative listing.
People working to settle their debts may also find that questionable negative items get added to their credit reports. Fortunately, the law affords them the right to dispute any negative items they feel are inaccurate, untimely, misleading, incomplete, ambiguous, unverifiable, biased or unclear. Lexington Law's credit repair services have helped thousands of clients remove millions of questionable items like these.