Debt relief services may lure you into fascinating advertisements which appear too good to be true.
One such advertisement advises you not to pay back 50% of your debt.
Is it a hoax or true? Take a closer look and you will understand.
What happens if a user is not able to clear his Credit card debt? In ordinary circumstances the users is required to file for bankruptcy.
Once this is done the courts will take charge of the assets of the debtor.
The assets that are exempt under bankruptcy laws will not be put up for auction.
In many states homes are protected and not put up for sale in bankruptcy proceedings.
Any other exempt assets like your furniture and personal belongings are also not liquidated.
This may leave the debtor having hardly any assets that are non exempt as per bankruptcy laws.
This means the Credit card company recovers little or no money.
To prevent the user from going in for bankruptcy the creditors are always willing to offer a debt settlement.
In a negotiated settlement the user will be asked to pay a lump sum amount towards settling a debt with about 50% of it being waived.
The waiver of debt is a big incentive for the user to pay up the lump sum amount.
It makes great financial sense to agree for a debt settlement.
Thus you get to eliminate your debt legally without paying it back.
What are the disadvantages of a debt settlement then? The biggest drawback is the hit you will take in your credit score.
An entry in your Credit report will say that you did not pay back your debt in full.
This will prevent you from getting good credit for a few years.
However the single most advantage is your ability to get out of debt without paying it back.
So make the most of it and get out of debt.