3 Reasons Why People Pursue Debt Settlement
Debt is easy to rack up, but far more difficult to pay down. According to a recent survey, more than two out of every five Americans carrying debt don’t know when they’ll pay it off — and one in four Americans believe their debts will outlast them.
Debt settlement is one strategy Americans with unsecured debts — that is, debts untethered to physical assets like a home or vehicle — can consider. This tactic aims to use negotiations with creditors to reduce the actual principal amount of debt owed. When it works, people may find they’re able to zero out debts for hundreds or thousands of dollars less than their starting balance.
Here are three reasons why some people pursue settlement in the face of significant debt.
Do-It-Yourself Debt Repayment Isn’t Working
Oftentimes the issue people encounter is that the interest on their debts just keeps growing, even if they’re making the minimum payments or a little more each month. After a while, trying to repay debts in this fashion can feel like running on a treadmill; instead of getting ahead, you’re running out of breath while staying in place.
While do-it-yourself debt repayment works for some, budgeting and prioritizing debts on your own is not always enough to make a real difference. If you’ve made little progress toward paying down your debts over the years, despite trying very hard to do so, it may be time to explore alternatives like settlement.
There’s a Hardship Involved
It’s nearly impossible to predict what life will throw at you before it happens — and many of these unexpected life events come with a price tag. Some people seek debt settlement because a specific hardship commands a big portion of their extra income. At the end of the month, there’s little to nothing to throw at debts.
Reading through Freedom Debt Relief reviews, you’ll notice enrollees have cited a variety of different reasons for deciding to enter the program. One participant noted that she decided to try settlement after experiencing a stroke. Another cited living with disabilities as a contributing factor to the credit card debt he’d built up. Yet another enrollee stated he had no idea what to do after losing his job, which spurred his decision to try settling.
As you can see, hardships come in many forms: medical expenses, job loss, death in the family and many more. Experiences like these can affect us physically, emotionally and mentally, while also decimating our finances. So, some people choose debt settlement in the wake of challenges that contribute to financial strain.
Bankruptcy Is a Last Resort
Have you ever seen bankruptcy portrayed as a relatively painless way to get a clean slate? This is an oversimplification of a complex process with lots of consequences to consider. It’s important to remember that there’s no such thing as a “get out of debt free” card. Bankruptcy is really more of a last resort, one worth weighing carefully before proceeding.
The exact consequences of bankruptcy will depend on whether someone files for Chapter 7 or Chapter 13. The former is more extreme, may require liquidation of some or all assets and stays on a credit report for a decade. The latter involves a repayment plan, may allow consumers to keep most or all of their assets and stays on a credit report for seven years.
If you’re considering bankruptcy, do yourself a favor and explore other options first. Some people end up going with settlement because it tends to be less disruptive.
People end up pursuing debt settlement for a variety of reasons: as an alternative to bankruptcy, as a solution to debt generated by a hardship and as a more aggressive approach when do-it-yourself debt elimination isn’t doing enough.