Debt settlement is the term used when we come to terms or agree to pay a portion of a specific debt with a creditor. Before achieving a settlement a negotiation process must take place.

Debt settlement and negotiation go hand in hand, a settlement cannot be achieved without the proper negotiation process. Many assume a settlement is the same thing as a negotiation, it is not, it is just simply the result of negotiation. Therefore when we speak of a debt settlement program, we are simply speaking of a negotiation process. What this means is the term debt settlement program is misused, it should be called debt negotiation or debt settlement service.

We know now what debt negotiation is, lets talk about debt settlement and how it works. Basically a debt settlement service or debt negotiation company is contacted or hired to negotiate settlements with your creditors. These companies will then do their best to keep all collection calls from going to their clients, thus making the creditor work directly with them and not the client. This is done by forwarding the credit company a Power of Attorney Appointment which is signed by the client authorizing the negotiations company to negotiate settlements on their behalf. Once this POA is established, it will take anywhere from a couple of days up to a month, depending on the credit card company being dealt with, most collection calls will then go to the negotiations service.

Meanwhile the client is saving funds on a monthly basis to settle his/her accounts. Depending on the total amount of debt being negotiated on, the client must save a percentage of this debt on a monthly basis. How much should a person save every month? The more the better.

There is a common misconception about debt settlement programs or people are misled to think they will have anywhere from 36 months and up to settle all debt. This is not true. If all accounts are brought into a settlement program and all accounts have the same amount of months delinquency, then all accounts must be negotiated on at the same time. With the exception of some accounts that are better negotiated on not with the original creditor but with collection agencies for greater savings.

Now we know we do not have all the time in the world to settle our debt and that there must be a strategy to settle our accounts, different credit companies dictate at what time of delinquency to deal with them. Who knows this better than your negotiations company? No one.

Most agreements to settle must be funded in a lump sum? Most of the time yes, for greater savings. The lower the settlement agreement (meaning more savings to the client) the faster the creditor requires payment. In some cases multiple monthly payments will be extended to the client. Settlements and monthly payments differ depending which creditor is being dealt with.

Negotiating unsecured debt is not as uniform as everyone thinks it is. Sometimes accounts have to be juggled to reach more favorable settlements in order to achieve the best possible savings for clients. Most of the promises told over the phone when first contacting a debt settlement company fall short of the clients expectations a year or two into the debt settlement program.

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