Creditors Benefit From Debt Settlement So Consumers Benefit Too

by : Adam Foster

Debt settlement programs offer debts the opportunity to reduce their unsecured debts by as much as 60% and become debt free in 3 years or less. They provide the opportunity to avoid bankruptcy and the negative impacts that filing for bankruptcy can have on a consumer. However, for a debt settlement program to be successful they need to be an appealing prospect for the creditors that are owed money. This is where it becomes essential that a consumer uses a reputable and experienced debt settlement company to ensure a greater chance of settlement and debt reduction.

Few Options Available

Consumers that enroll in a debt settlement program typically have very few other options left available to them. A serious change in personal circumstances may have left the consumer with less incoming finances than their regular monthly repayments total. As such, unsecured loan lenders are also aware that they have similarly few options available to them in order to recoup their losses.

A Final Roll Of The Dice

Lenders see legal action as a final roll of the dice. They know that the courts will usually agree a substantial decrease in the regular repayments and that backing a borrower into a corner may lead them to file for bankruptcy. As such, the majority of lenders will take any action or recourse possible to negate the need for legal action. However, if they feel that legal action is the only viable option left, then they will proceed with it.

Reasonable Repayment Schedule

Debt settlement programs should be negotiated so that they last for a period of three years or less. This gives the creditor an incentive to agree to a healthy reduction in repayments. They know that they will recover a portion of their debt within a comparatively short space of time. For this reason, creditors will often agree to consider reductions of up to 60% of the total debt they are owed.

An Improved Repayment Success Rate

Bankruptcy orders are extremely limiting and difficult for consumers to adhere to. Most people are required to file for chapter 13 bankruptcy, which requires the courts to determine living expenses for the individual. These figures are calculated using national and local averages, and not considering the consumer's personal circumstances. Because all of the remaining money that a consumer makes is used to pay off debts, consumers often fail to meet their bankruptcy requirements.

Debt settlement programs are more forgiving for consumers. They provide the opportunity to determine a personalized budget, rather than an average budget, and then debt settlement figures are calculated after this figure is worked out. As such, a higher proportion of consumers that enroll in debt settlement stay the course and repay the renegotiated debt figures. Creditors, therefore, know that they have a better chance of recouping their money through debt settlement when compared to other methods.

Avoiding The Costs Of Collection Agencies

Creditors do have other options. Collection agencies and legal firms cost a considerable amount of money and many will agree reduced payments anyway. Establishing a repayment agreement can also take several weeks or longer. Debt settlement doesn't directly cost the creditor any money and may result in the renegotiated figure being repaid quicker.

Debt Settlement Offers Benefits To Creditors And Consumers

Because debt settlement is, in the relevant circumstances, the most attractive proposition to creditors this means that they are likely to accept what they view as reasonable negotiations. In turn, this makes debt settlement programs like those offered, a hugely beneficial option for the creditor that is looking to avoid bankruptcy, reduce their debt figures, and become debt free within three years.