What is debt settlement and how does it work?

Debt settlement is a process where a creditor and a debtor come to an agreement in order to settle a debt for less than what is owed. It is a type of alternative dispute resolution (ADR) and is a popular option of resolving outstanding debts. When a debt is settled, the creditor agrees to accept a lump sum payment from the debtor that is lower than the total amount owed for the debt. The creditor can choose to accept the lump sum payment as full payment or they can agree to accept a portion of the total amount owed. In return, the creditor agrees to waive the remaining balance of the debt owed. In order to use debt settlement as an option for resolving a debt in Florida, the debtor must be able to demonstrate that they are unable to make the necessary payments to cover the entire amount of the debt. In order to do this, the debtor must have a good reason why they cannot afford the entire amount of the debt. Reasons can include things like job loss, medical bills, and other financial hardships. Once an agreement is reached, both the creditor and debtor must sign a Debt Settlement Agreement. This document outlines the terms of the agreement and any other important aspects of the settlement. Once both parties sign, the amount of the debt is considered settled and the debt is reported to the three major credit bureaus. This will show the debt as “settled for less than the full amount”. Overall, debt settlement is a good option for resolving a debt in Florida if the debtor is unable to make the full payment. It is important to remember that it can have an effect on the person’s credit score and it is important to understand the terms of the agreement before signing.

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What is debt settlement and how does it work?

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