Debt negotiation and debt settlement are essentially slightly different ways of addressing the same issue—working with a creditor to resolve your debt. Understanding your options for debt settlement is the first step toward regaining control of your finances. 

For help navigating your situation, contact the debt lawyers at Heston Law Firm today for a free debt case consultation. We’re here to help.

Debt Lawyer: How Does Debt Negotiation Work?

Debt negotiation is the process of working directly with your creditors to change the terms of your existing debt. Instead of a lump-sum payoff like in debt settlement, negotiation focuses on creating more manageable payment plans. This might involve lowering your interest rates, reducing your monthly payments, or extending the repayment period. The goal is to make your debt more affordable and sustainable.

To negotiate your debt, you need to prove a case for why you need different terms. This might involve demonstrating financial hardship, such as job loss or medical expenses. Creditors may be willing to negotiate to avoid the costs and uncertainties of collection or legal action.

What About Debt Settlement?

Debt settlement is a different approach. Instead of changing the terms of your existing debt, you agree with your creditors to pay a lump sum that’s less than the total amount you owe. Essentially, you’re settling the debt for a reduced amount. This often involves accumulating funds over time and then offering a one-time payment to the creditor.  

Often, individuals pursuing debt settlement stop making payments to their creditors. This is a crucial and potentially risky aspect of debt settlement. While you’re saving up the lump sum, your debts are accumulating interest and late fees, and your credit score is likely taking a significant hit. Once you have the funds, you offer a settlement amount to the creditor. They may accept or counteroffer.  

For example, you might owe $10,000 on a credit card but offer to settle the debt for $6,000. If the creditor agrees, you pay the $6,000, and the remaining $4,000 is forgiven. 

However, it’s essential to understand the implications. Debt settlement can severely damage your credit score and may have tax implications. It’s absolutely critical to have legal counsel during this process. A specialized debt lawyer can help you understand the risks, negotiate a fair settlement, and ensure the agreement is legally binding, protecting you from future collection efforts. They can also advise you on the potential tax consequences of debt forgiveness.

Custom Solutions for Your Situation – Debt Lawyers

Navigating debt can be complex. Get personalized advice from experienced debt lawyers at Heston Law Firm. We’ll analyze your situation, explain your options, and guide you toward the best solution for your financial future. Contact us today for an expert case consultation.