Struggling with a debt you can’t pay off can hold you back from being successful in life. Whether you’re unable to save for an education or home because of your debt or your credit score is hurting because of late fees and missed payments, getting out of debt is a task not everyone can handle.
If you have a debt you’re struggling to pay down, you probably are looking for a way to reduce the amount you owe as quickly as possible. Unfortunately, it may feel like the only way to do this is to come across a large sum of money.
But you don’t need to discover a rich family member or rob a bank to get out of debt. You may qualify for a debt relief program, such as debt settlement.
What is Massachusetts Debt Settlement?
Although Massachusetts is a small state, its residents can rack up major debt. While debt is easy to fall into, it isn’t so easy to get out of. It can take some serious work to climb out of a hole of debt.
Debt settlement provides individuals with too much debt an option for finding relief. Through a debt settlement program, a debtor and creditor can come to a new agreement about the total amount of money that is owed. This new settlement amount will allow both parties to close out the original agreement and move forward.
But if you’re feeling like debt settlement is a little too good to be true, it is. While debt settlement can be extremely beneficial to the right people, it isn’t something you should enter into lightly.
Let’s take a look at the way the debt settlement process works:
- Step 1: Debtor stops making payments on the debt, whether strategically or out of desperation for financial relief.
- Step 2: Debtor continues to miss payments, causing a dent in their credit score and late fees to grow.
- Step 3: Creditor starts to believe they may not see payments on the debt and sends the debt into collections.
- Step 4: Debtor and debt settlement organization reaches out to creditor with a settlement proposal. This settlement proposal is typically much lower than the total debt owed.
- Step 5: Creditor can accept or decline the offered proposal.
- Step 6: If the creditor accepts the settlement amount, debtor must make the payment. If creditor declines, debt collectors will continue to attempt to get a payment from the debtor.
- Step 7: Once settlement amount is paid, the debt is officially closed.
As you can see, there is a real strategy behind debt settlement. In order to allow your creditors to believe they won’t see money on the payment, you need to stop giving back your monthly payments. With each payment you miss, your credit score can take a ding and you’ll acquire more debt through interest rates and late fees.
Who Should Consider Debt Settlement?
While the debt settlement process can have a negative effect on your credit score, it is still a strong strategy for some individuals. If you are already missing your payments or your credit score is already low, debt settlement can be a way to get out from under the pressure of your debt. Otherwise, you may want to consider another debt relief option.
Debt settlement isn’t beneficial to everyone. For those just looking for an easy way to get out of paying off a credit card you’ve racked up debt on, the debt settlement process will be more of a hassle than its worth. Because of the damage it can do to your credit score, debt settlement isn’t recommended for individuals who are able to make their minimum monthly payment.
Because all forms of debt cannot be settled through the debt settlement process, it is not recommended for individuals looking to lower their mortgage or other kinds of secured debts. Only unsecured debts, such as credit cards or medical bills, can be reduced through debt settlement.
Finally, debt settlement will not settle all of your debts. In order to settle more than one debt, you would need to go through the negotiation process with all your creditors. For those with many debts, this can be extremely time consuming.
If you’re considering debt settlement as way to find relief from the money you owe, always speak with a professional first. While debt settlement can provide you with a quick reduction in the total debt you owe, it can also make it difficult for you to borrow money in the future. A professional can help you discover if there is a better option for finding relief from your debt.