Understanding Debt Settlement and Debt Elimination

Imagine getting rid of a mountain of debt, and doing so legally! Debt elimination is one of the primary goals of Americans who are heavily hit by a faltering economy and waning home prices as well as shrinking nest eggs and college funds. The vast majority of everyday consumers carry in excess of $5,000 credit card consumer debt. Instead of going down, the indebtedness actually goes up.

Up until just a few years ago it was laughingly simple to receive credit. No matter the credit score – even consumers will little more than a score of 700 could get as much credit as they felt was necessary – consumer credit was a commodity that was extremely easy to get. As a direct result, a good many consumers were not as responsible with their credit as their actual fiscal health warranted. This has led to unprecedented amounts of credit card debt that is currently born by the average American household.

Eliminating debt requires some difficult decisions that need to be made. Rather than charging anything and everything, a rigorous budget needs to be made and kept. Moreover, living within a consumer’s means is sometimes hard to do if it requires the consumer to forego instant gratification in favor of saving up for a large purchase, or actually denying gratification altogether. Moreover, the amount of money allocated to the repayment of consumer debt needs to be increased.

Using what is considered the debt repayment snowball method, consumers are advised to concentrate on paying off one credit card debt, and then – once it is paid in full – applying those monthly payments to those that go to another credit card. Sadly, for a large number of consumers this is insufficient and will not result in financial freedom in a relatively short amount of time. This is where debt settlement agencies come in; their highly trained debt negotiators work with debtors and creditors to set up a workable payment plan that fits into the debtor’s budget.

Debt settlement is an advantageous step, since it allows consumers to greatly decrease the amount of credit debt they carry while at the same time the payments are drastically reduced. Unfortunately, there is also the fact that a debt settlement leads to some adverse notations on a credit profile, making it a bit harder to obtain affordable financing for a car or home loan. Of course, on the flipside are the avoidance of the adverse notations that come with being late on a number of bills, having some sent to collection, and in the end filing for bankruptcy.

After all, a bankruptcy remains on a credit record for 10 years, while a negative mark remains only for seven. All in all, consumers have the opportunity to undergo debt settlement and debt negotiation, have their debt restructured, and then find financial freedom within about a five year period. Even if you do not think that you are a candidate for debt settlement right now, keep in mind that in the current uncertain economic climate, it only takes the loss of a job to also put you in a position to need this kind of help.