Debt settlement is a good alternative to the bankruptcy but even then it is rarely preferred over bankruptcy. The reason for this is that there are various myths about debt settlement which are not true. Normally the people believe these myths and they do not avail the better solution of debt settlement. They would prefer to go for bankruptcy because of the misunderstanding that has captured their minds about the debt settlement.

Here are all the myths which have been in vogue about the debt settlement since long. You need to read all of them and then you will be able to understand how the debt settlement can help you because it is not what you have been thinking it to be.

  • Debt consolidation vs. debt settlement: The greatest misunderstanding about the debt settlement is probably this that the people do not differentiate between the debt settlement and debt consolidation. Normally it is considered as the one and the same thing. It refrains people from choosing the debt settlement against the bankruptcy. The debt consolidation is actually different from debt settlement. In the debt consolidation program, you combine all the outstanding payments into one payment and your creditor agrees to lower the amount of interest or sees it off in some rare cases. This helps you to pay off the debt in the longer span of time but on lower interest rates. Where as in the debt settlement the things are totally different. Your settlement company enters into negotiations with the creditors to reduce your debt by at least 30-40 %. In such cases there is no collateral security as is in the case of consolidation.
  • Creditors do not work with debt settlement companies: This is the second great misunderstanding about the debt settlement. The thing is that the creditors would actually be willing to work with the debt settlement companies. They would not like to see nothing coming in the case of bankruptcy. They can have something in the case of debt settlement and who wants to see the bankruptcy? So never think that your creditor will not be willing to work with the debt settlement company. In fact they would prefer it over the bankruptcy.
  • Credit score problems: Generally it is believed that the debt settlement can ruin your credit. This is a false believe because the bankruptcy will do even worse. Your inability to make the payments will adversely affect your credit score whereas debt settlement will allow you to improve the credit in the long run. You may have negative credit score after the debt settlement program, but in the long run, you will be able to improve it unlike the bankruptcy which will hardly let you do this.

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