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Debt Settlement v. Debt Negotiation

If you are struggling with mounting debt and are searching for a debt relief option, you should consider either debt settlement or debt negotiation. Both debt settlement and debt negotiation are effective ways of reducing or eliminating debt. However, they are slightly different, so it’s important that you understand what is involved with each before you take any type of action.

Debt Settlement is an approach to reducing debt by negotiating with creditors to reduce the balance that you owe. Sometimes creditors are willing to reduce a person’s debt by anywhere from 40-60%. While this might seem too good to be true, some creditors simply feel it’s better to recuperate some of the money that is owed than risk getting nothing should the debtor file for bankruptcy. The two downsides to debt settlement are the tax implications and the effect it will have on your credit score. Although your credit score won’t be completely ruined, it will lower your credit score.

Debt consolidation works by taking out a large loan to cover all of your debt. Instead of repaying multiple creditors, the debtor instead makes payments to the company that issued the larger loan. Like debt settlement, debt consolidation will affect your credit score, and some lenders might put a temporary hold on extending new lines of credit.

There is no simple solution to overcoming debt, but there are plenty of options available to you. An experienced Los Angles bankruptcy attorney at Pacific Attorney Group can meet with you to discuss your financial situation and determine the best debt relief program for you. To schedule a consultation, contact the office today at (213) 236-4400.