What is the difference between debt negotiation and debt settlement?

Debt negotiation and debt settlement are two different approaches for managing debt. Debt negotiation involves negotiating with a creditor to lower the amount owed on a debt, while debt settlement involves negotiating with a creditor to pay a lower amount than what is owed, in exchange for the creditor forgiving the remaining debt. In Nebraska, debt negotiation may be used to reduce the amount of interest or to arrange a payment plan. Creditors are not required to accept these offers, however, and may refuse to negotiate. It is important to note that the creditor may report the original amount of debt on a debtor’s credit report. Debt settlement is a process in which a third-party company, also known as a debt settlement agency, will negotiate with a creditor on behalf of the debtor to pay a reduced amount of the amount owed. The debtor generally pays money to the settlement agency, who in turn pays the negotiated sum to the creditor. Although this process does not guarantee that the creditor will forgive the remaining debt, it does offer a chance for debt forgiveness. In Nebraska, a debt settlement agency must be licensed and bonded, and the debtor must be informed of the fees associated with the debt settlement process. It is important to note that, if accepted, the creditor will report the reduced amount as paid on the debtor’s credit report, but they may also report the total amount owed as “paid in full for less than the amount owed." Furthermore, debt settlement can have a negative impact on the debtor’s credit score.

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What is the difference between debt negotiation and debt settlement?

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