When considering a debt settlement, there are various options that one can take. There various debt settlement programs and companies that dedicate their efforts in offering debt settlement services. A debt settlement program that is initiated through a debt settlement company will usually require that the debtor provide for lump sum cash to be furnished. However, due to the nature of what will usually incite a debt settlement, a lump sum cash payment will usually be hard to come by on behalf of the debtor. 

 

 

Therefore, debt settlement programs can either allow for the debtor to save and collect funds for a certain amount of time in order to provide for such a payment. Another option will be a debt settlement program that requires a third party trust account where the funds will accumulated over a period of time. These kinds of debt settlement programs can help reduce the debt as much as fifteen cents on the dollar. This allows for an overall reduction of the debt of up to 50% in many cases, because a lump sum cash payment is to be made at the end of a pre- determined time period. 

 

 

A debt settlement program can also be initiated by the debtor him/herself, in where the individual will personally deal with the creditors and manage for an arrangement for a debt settlement program. This will allow for the debtor to save money in terms of fees that debt settlement companies may charge. However, debt settlement programs negotiated by the debtor will almost always involve a lump sum payment, and usually a payment plan debt settlement program is not an option. 

Debt settlement involves a situation in which the lending institution or creditor will reach an agreement with the debtor in regards to a debt balance. Typically, debt settlements will entail the creditor agreeing to accept an amount that is less than the actual debt balance in order to at least recover some of the amount due. Debt settlement often times is a last resort in terms of the creditor in which the debtor will not be able to pay the full amount, and thus, debt settlements allow for the recovering of least some of the balance instead of risking no payment at all. Furthermore, debt settlements will also avoid any kind of legal processes and any further expenses that may be involved in the case that the situation were go to litigation and court trial. 

Debt settlement will prove to have benefits for parties involved. For the crediting party, it allows for the recovery of debt, at least partially, in situations that may potentially lead to losing any kind of payments on part of debtor, such in the case of bankruptcy. For the debtor, a debt settlement will prove to be extremely beneficial because it allows to eliminate an outstanding debt for less than the amount that is owed. It allows a way to eliminate or avoid late fees accumulation and even avoid bankruptcy. However, there are some disadvantages for both parties as well. Debt settlement will be evident on the debtor’s credit report and does have a negative impact on credit scores. For the creditor, an inherent loss will be the most obvious disadvantage in a debt settlement, for only a partial amount is being recovered.