Your Responsibilities In A Debt Settlement Programme

How does debt settlement work?

You can settle your debt by yourself. Reach out to your creditors and explain your financial situation. It will take time and persistence, but you may be able to lower the amount you owe, change your interest rate or come to another form of agreement. While you and your creditors find a solution, you will continue to make the payments you owe.

If you opt for a third-party company or a lawyer, you will need to pay for their services as a flat fee or a percentage of your savings. This means that even if your debt is settled for less than what you owe, you still have additional costs outside your outstanding debt.

The debt settlement company will require you to stop paying your creditors and make payments into a savings account. That means depositing regular amounts into an account the company can use to pay your debt or collect the fees you owe. You may fall further behind on payments, and your credit score could plummet.

You will need to agree to the new terms if a settlement is reached — a lump-sum reduced amount, a lower monthly payment or a debt discharge. This needs to happen for settlement to move forward, but you’re not obligated to agree to any terms if you don’t want to. Depending on how the debt was settled, you may need to make payments to the company handling your debt until your outstanding debt is paid in full.