When people are heavily in debt, to the point where payments on money they owe their creditors are such a huge part of their income that they can not realistically keep up with them, they usually start looking for options that would allow them to get back on their feet financially. To achieve this, many people choose debt settlement. We're going to look at what this option offers people who choose to go that route.
Debt settlement is simply a process through which people debtors and creditors negotiate to find an agreement that's beneficial to both parties. Debtors are attracted to it because it allows them to reduce what they owe by a huge margin (sometimes up to 60%). The big difference between debt consolidation and debt settlement is that the former bundles together all your debt into one with more favorable terms, while the latter allows you to negotiate a reduced amount from what you owe your creditors.
The process is simple, but long. You basically have to negotiate with every single one of your creditors, telling them that you simply can not keep paying with your current level of debt. The idea is for them to agree for you to pay a portion of the debt, and they will consider it paid in full, effectively "forgiving" a portion of your debt. The only reason why lenders will negotiate with you is that they'd rather receive a portion of the debt rather than nothing at all.
Now here's the part where a lot of people get confused. Very often, people are told that after the negotiation, they get to pay an agreed upon proportion each month until the negotiated balance due is paid off. In reality, creditors rarely give out that type of deal. In almost all cases, a debt is settled with the understanding that you are required to pay the settled amount right then and there. This is the main reason why debt settlement is more convenient for smaller debts.
Although you can certainly negotiate yourself with your creditors, a lot of people prefer to let a professional handle the transaction. These people are trained and it's their job to negotiate the best deal for you. There's also the fact that creditors will be more inclined to negotiate with other companies, as opposed to dealing with people who are very emotionally involved in the negotiations.
If you need to settle your debts, it's important to choose a reputable debt settlement company. This is a field where there are a lot of people offering this type of service, and unsurprisingly there are many of them with less-than-perfect records with the Better Business Bureau. Do your research and check every company's track record before ever giving them your business.