What is a debt settlement?

A debt settlement is an agreement between a creditor and a debtor to reduce the total amount of debt owed. It is commonly used by creditors as a way to help debtors pay their debt and avoid bankruptcy. In Florida, debt settlement is a legal process that must be negotiated and approved by both the creditor and the debtor. In order to be eligible for a debt settlement, debtors must contact the creditor directly and present their financial situation. The creditor will then review the details and consider whether or not to accept the settlement offer. Creditors typically prefer to settle debt rather than pursue legal action or other more costly options. The creditor may agree to reduce the principal balance of the debt, waive fees and interest, or both. Debt settlement agreements must be in writing and signed by both the creditor and debtor to be valid. The creditor may require the debtor to make a lump-sum payment as part of the settlement agreement or the debtor may agree to a payment plan with monthly payments. Once the agreement is finalized, the creditor agrees to forgive the remaining debt if the payments outlined in the agreement are made. It is important to keep in mind that debt settlement can have a negative impact on a debtor’s credit score.

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