There is much debate looming over the issue of debt negotiation versus debt settlement. While some advocate settling debts, others feel simply negotiating a lower payment is the way to go. In general, there are some myths associated with each process that are important to consider before you choose which option is right for you.
They Have The Ability To Stop Collection Calls
Most people that are working to resolve their debts are looking for some freedom from harassing collection calls. It is a common assumption that once you enter a settlement or negotiation agreement, credit collections will stop. The truth is, there is no legal protection against creditors in either debt settlement or credit negotiations. The only way to obtain legal protection from credit collections is in bankruptcy. This isn’t to say that you aren’t protected from certain creditor actions, just that neither of these processes can guarantee that collection calls will stop.
Third Party Companies Are All The Same
Whether you are pursuing debt settlement or debt negotiations, using a third party company comes with added risks. It can be difficult to determine legitimate companies from non-reputable ones, which can prove to be problematic if you get caught up in a debt relief scam. Anyone can settle or negotiate their debts directly with creditors without the help of a third party company. If a debtor chooses to seek help for these options, it is best to hire a credit attorney who can mediate the interactions.
Neither Damages Credit
The real damage done to credit reports happens when debts go unpaid and accounts become considered delinquent. While neither debt settlement or debt negotiation does direct damage to a credit report, both of these transactions may be reported to the credit bureau. This means that securing credit in the future may be more challenging as a result. In general, negotiating debts is carries less stigma than settling debts. Future creditors want to know debts have been repaid, even through modified terms, rather than settled for less than what was owed.