What happens to the debt that’s been settled?

When a debt is settled, it is essentially an agreement between you and the creditor to pay less than the full amount of the debt. Typically, the creditor agrees to forgive a portion of the debt and accepts a lump-sum payment from the borrower in exchange. The amount settled is generally less than the original debt amount and is often the maximum amount of money a borrower is able to pay. In Arkansas, once the debt is settled, it is marked on the borrower’s credit report as “paid” or “settled,” but the negative effects of the debt still remain on the borrower’s credit score. Depending on the creditor, there may also be a notation of the debt being settled or paid off for less than the full amount. In addition, many creditors will also sue debtors if a settlement is not possible. In these cases, the court can require the borrower to pay the amount set forth in the settlement agreement, which is usually a lump-sum payment. If the creditor is able to modify the settlement agreement to require monthly payments, the borrower must comply with the court order. Although debt settlement is often a useful way to reduce the amount of debt owed, it should be used as a last resort and only after discussing all other options with a financial advisor. By understanding the law and how it applies to debt settlement in Arkansas, borrowers can be better prepared to make smart decisions about debt repayment.

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What happens to the debt that’s been settled?

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