Every year over one million individuals file for bankruptcy. This means that if an individual struggling with debt problems files bankruptcy, their debts are absolved.
What does this mean for a creditor?
It is in the best interest of a creditor to lower a debtors payments through debt settlement. Otherwise, if the debtor files bankruptcy, the creditor gets nothing.
Obviously, this means that creditors would rather settle your debt by lowering your payments or amount owed rather than risk getting nothing if you were to file for bankruptcy.
Through debt settlement:
- The creditor does not get the full payment owed. instead, they get something instead of nothing.
- The person in debt can restore their credit rating and avoid bankruptcy by making lower payments agreed upon.
The company/organization which takes care of the negotiations usually also earns a little off the new arrangements, but that's not normally a concern to those in debt, as long as it means lower monthly payments for them.
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