Debt settlement is an approach used by both the creditor and debtor on an agreeable balance as final payment.
Usually, it is also called debt arbitration or debt negotiation.
This procedure can be done with or without the advice of a financial or law professional.
These days, debt settlement is usually undergone by creditors in collaboration with a settlement company.
This settlement company though will be taking up a large sum of charge either from the creditor or the debtor.
With that happening, the chances of the debtor to have better reduced balance become slim.
How does a debt settlement become effective? Once a debtor owes money, services, or things that are supposed to be paid in a given time, he or she is supposed to pay the amount in staggered or in one payment.
As long as the minimum payment is being paid, there will be no conflict that will result in debt settlement.
But when the debtor starts to ignore payments to be made, intentional or not, the creditor will have to arrange a debt settlement.
He may go through the task or hire a settlement company.
Usually, to settle the financial obligations via reducing the balance is a good thing for both the creditor and the debtor.
For the creditor, he or she gets at least or more than the principal amount owed.
Although that is not desirable, the debtor can opt for bankruptcy that will lead its way to quash the credit due to incapacity to pay.
On the part of the debtor, he gets off with less.