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Please explain the difference...

Date: Sat, 10/21/2006 - 16:11

Submitted by PDLFREE
on Sat, 10/21/2006 - 16:11

Posts: 1245 Credits: [Donate]

Total Replies: 2


What's the difference between debt settlement and debt consolidation?


If I understand correctly, debt settlement is when an attorney tries to settle your debts for a lower amount than what you actually owe, and debt consolidation is consolidating all of your debts together and just making one payment a month or however it is set up to be paid. The one payment is distributed between all of your debts.


lrhall41

Submitted by brownsugar on Sat, 10/21/2006 - 16:16

( Posts: 1389 | Credits: )


you are right, brownsugar. In a consolidation program, you are actually supposed to pay at least the principal amount borrowed. The counselor will negotiate with the creditors to reduce the existing interest rates and if possible waive off the late payment fees. A plan is fixed after evaluating how much you can afford each month. Calculate your plan thinking about your finance in the future. Whatever happens, you shouldn't default in the plan set in the program, otherwise all the benefits given by your creditors will be withdrawn upon the first default.

A settlement program actually reduces the total amount by 40% to 60%. This program is upon the negotiations done by your settlement company and the terms they have with the creditors. A company that has worked with the creditors in the past will possibly get better results from them. Your financial ability is put in front of the creditors and explained that you are not able to afford the payments anymore. Thus, a settlement can help the creditors in getting some of their money instead of getting nothing. At first, the creditors won't express if they will work on your proposals because they will still expect that you should pay off the full amount. That is why, they call people even after getting the proposals from the settlement companies and portray that they are going to sue you. There are chances that this may or may not happen. Because if the matter is taken to the court, the company has to bear the court costs and fees. Your settlement company will show all documentation about hiring the program. The judge will understand that you don't have money, so how will you pay the attorney fees and court charges. Ultimately, the creditor has to compromise at the court room and bear the expenses. So, this can a win win case except for few typical situations.


lrhall41

Submitted by Flying Cats on Sat, 10/21/2006 - 16:28

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