What is debt settlement and how does it work?

What is debt settlement and how does it work?

Debt settlement is a negotiation process where you pay a lump sum to settle your debts for less than you owe. It typically involves working with a debt settlement company or negotiating directly with creditors.

What are the pros and cons of debt settlement?

The pros include reducing the total debt amount and avoiding bankruptcy. The cons can be a negative impact on your credit score and potential tax implications on forgiven debt.

How long does the debt settlement process take?

The process can take anywhere from a few months to several years, depending on the amount of debt and the negotiation outcomes.

Will debt settlement affect my credit score?

Yes, debt settlement can negatively impact your credit score, as it indicates to creditors that you did not pay the full amount owed.

What should I consider before choosing debt settlement?

Consider your overall financial situation, the potential impact on your credit, and whether you can afford the lump sum payment.