What is Debt Settlement?
Debt settlement is a form debt relief that can assist you in overcoming the burden of overwhelming debt in less time and for less money than other debt relief options.
On average, consumers who complete a debt settlement program do so in 3 to 5 years and generally pay less than half of the balance owed.* That amount typically includes any interest charges, late fees, and the debt settlement company’s fees – at least when your debt settlement company is Debt Shield.
Debt settlement is an alternative to bankruptcy, which exists to assist consumers with significant debt due to personal or medical hardships. Too often, consumers join consumer credit counseling services in an attempt to repay their debt, but soon find that it may have not been their best debt relief option. Some estimates show over 75% of people who turn to consumer credit counseling services either quit or are dropped from the program. As a result, many clients end up filing for bankruptcy. Debt settlement is an alternative solution for people who legitimately cannot afford to repay their debts and are looking for an honest way out of a debt-burdened life.
Debt settlement serves an important role in the debt relief industry because it is not like consumer credit counseling, debt consolidation and other debt relief options that coach you through repaying your entire debt, even if you cannot afford to do so. Instead, debt settlement involves negotiating with your creditors to settle your debt for a reduced amount. This is why debt settlement is a growing debt relief solution.
Many credit card companies have debt negotiation and settlement departments for the specific purpose of negotiating with debt settlement companies like Debt Shield. While they prefer that you repay the entire amount you owe, creditors understand that lending credit is a risk, and sometimes consumers experience legitimate financial hardships that prevent them from repaying the full debt.
It is important to us that you understand the debt settlement process – or any other debt relief option you choose – before committing to a program. The following pages explain how and why the debt settlement process works. Keep in mind that not all debt settlement companies are alike and others may not have the same process and steps described here.
Settlement averages do not include 0% settlements or client-initiated settlements above our recommended limits. Sometimes clients choose to settle a debt for more money than Debt Shield recommends in order to settle the debt faster.
* The statistic is derived from the report, "Credit Counseling in Crisis," published by Consumer Federation of America, in conjunction with NCLC, April 2003, page 27: "Most agencies do not release information on their retention rates, although a 1999 NFCC memo cited by Consumer Reports found that just 21% of their clients completed DMPs while about the same percentage left to self-administer debt payments. NFCC now reports completion rates of about 26% with about 20% leaving for self-administration."
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