Debt settlement is a informal procedure which takes place outside of formal courtrooms. In essence, a successful settlement starts when debt settlement attorney contacts your creditors to negotiate on a reasonable agreement for repayment. If you and your creditor reach an agreement, this is called a “settlement”. If successful, most of your debt will be settled for a fraction of what you actually owe.
There are disadvantages to debt settlement however. One of these is the fact that it does not provide you any kind of legal protection. If you file for bankruptcy, you will not find any protection from creditors in this regard. Therefore, if you do decide to file for bankruptcy, you will have no money. On the other hand, debt settlement may give you enough time to reorganize yourself and reestablish your finances.
Another disadvantage of debt settlement is that it may not be the best solution for all kinds of debt. For example, if you have credit card debt, you may not be eligible for settlement. This is because most creditors do not negotiate with debt settlement firms on their own. Instead, they work with representatives of debt settlement companies. If you do not pay back your installments promptly, your creditors can sue you for failure to comply with your obligations.
Another drawback is that creditors may not report any kind of debt settlement to your credit report. They may report that you settled your account but your debt remains unsettled. If you do not pay back your creditor, this will reflect on your credit report and could make your credit score go lower. Therefore, if you have settled your account, you should make sure that it stays settled so that you do not have any negative remarks on your credit report.
On the other hand, debt consolidation does not have any disadvantages. First, debt consolidation requires you to make one monthly payment, which is combined to all your previous monthly payments. This will make it easier for you to manage your finances since you only have to make one payment a month. Moreover, debt relief Tucson companies usually negotiate with your lenders to reduce the amount you need to pay monthly. These reduced amounts can then be applied towards your outstanding unsecured loans.
In addition, debt settlement can help you manage your finances much easier because it will eliminate or reduce your interest rates and fees. However, it may not be helpful to you if you still owe a lot of money. If you want to get rid of your unsecured debts without incurring any financial penalty, debt consolidation is better. As long as you manage your finances well, you can easily eliminate your bills and make a decent budget. Eventually, your credit score will also improve so that you can avail of better financial options in the future. For more details visit https://www.arizonadebtreliefhelp.com/debt-settlement-tucson-az/.