3 Facts to Know before Pursuing Debt Settlement

June 20, 2015

In light of our recent blog on the pros and cons of debt consolidation, now is a good time to take a look at another debt relief option – debt settlement. While debt settlement can help some people climb out of debt, it is important to understand the potential risks before proceeding in order to:

  • Determine whether debt settlement is right for you.
  • Avoid complicating your debt situation and financial struggles.

Debt Settlement: Here’s What You Should Know

When considering debt settlement, you should be aware that:

1 – Creditors don’t have to agree to settle your debts.

If you’re considering debt settlement to resolve your debts, here’s what you should know first, experienced Colorado Springs bankruptcy lawyers explain.

If you’re considering debt settlement to resolve your debts, here’s what you should know first, experienced Colorado Springs bankruptcy lawyers explain.

First and foremost, it’s critical to realize that, although debt settlement companies may promise to settle your debts, your creditors are under no obligation to agree to a settlement. This can mean that, in some cases, these companies only end up settling a few debts (and, in many cases, only people’s smallest debts).

2 – Debt settlement programs can take long as 36 months (or more) to complete.

In fact, debt settlement programs typically require people to put money in a designated savings account for some period of time (usually 36 months but possibly longer) before their debts are settled.

Given that people seeking debt settlement are likely already struggling to make their debt payments, many people run into trouble keeping up with these deposits, causing them to drop out of these programs before realizing any benefits.

3 – Debt settlement programs can plunge people into further debt.  

Debt settlement companies often tell people to stop making payments directly to their creditors as their agents work on negotiating settlements. When people comply with these requests, their debt will accrue fines and additional interest, and this:

  • Will plunge people into further debt
  • Can lead to creditors repossessing assets and/or filing lawsuits against people, attempting to garnish their wages
  • Can leave people with way more debt than they had when they had initially sought help from the debt settlement company if:
    • The company can’t ultimately settle their debts.
    • The people end up dropping out of the program because they couldn’t afford to keep making the monthly deposits.

So, the bottom line is that, if you are considering debt settlement, be sure to consult an attorney first to find out if debt settlement is a good option for you or if there may be a better debt relief solution.

Colorado Springs Bankruptcy Lawyers at the Law Office of Jon B. Clarke, P.C.

Are you struggling with debt and ready for a financial fresh start? If so, it’s time to contact the trusted Colorado Springs bankruptcy lawyers at the Law Office of Jon B. Clarke, P.C.

Our Colorado Springs bankruptcy attorneys bring more than 35 years of experience to our clients’ cases, making them effective at successfully resolving even the most complex bankruptcy cases on behalf of individuals and businesses alike.

Contact Us Today

To find out more about your best debt relief options, as well as how we can help you obtain the financial fresh start you need and deserve, contact us today by calling (303) 779-0600 or by emailing us using the contact form on this page. We also encourage you to complete our Business or Consumer Debtor Analysis Form so that we can provide you with professional advice that is as specific and helpful as possible.

From our offices based in Denver and Greenwood Village, we provide people throughout Colorado with the highest quality debt relief legal services.

Categories: Alternatives to Bankruptcy