Do I Have to Own a Home in Order to Do Debt Settlement?
By Hector Milla

Debt settlement is the process of negotiating with creditors in order to lower the amount of debt that a consumer owes to a creditor. This process is not used with secured financial obligations because the collateral which consists of an automobile, a house, or some other tangible item can be repossessed by the creditor in place of the money owed. Consequently, this program does not require that a consumer own a home to use the service.

The foundation of settlement is not based on collateral. It is simply a negotiation in which creditor compromise with debtors in order to avoid consumer bankruptcy. In the event of a consumer declaring bankruptcy, the creditor could stand to forfeit the debts owed by the consumer. This would be a great loss to the creditor. Instead of losing the complete revenue associated with the amount owed, the creditor will come to an agreement with a settlement agency. The creditor will forgive a portion of the debt in exchange for receiving an agreed upon payment monthly.

In most settlement cases, the creditor will forgive up to as much as fifty percent of the original amount owed. In addition, the creditor will also be able to claim a tax credit for the forgiveness. The program then has a much more positive outcome for the creditor than forcing the consumer to declare bankruptcy which would result in a much greater loss for the creditor. The entire process is therefore based on negotiations and agreements instead of collateral.

This provides all consumers who are suffering from overwhelming indebtedness an alternative to outright bankruptcy. The option of settling, however, is limited by this feature at the same time. It is limited to unsecured debt and is not an option for debt that is secured by some form of collateral like an automotive loan or a mortgage.

By the way, by researching and comparing the best debt settlement services in the market, you will be able to determine the one that meet your specific financial situation. Nonetheless, it is advisable going with a trusted and reputable debt counselor before making any decision, this way you will save time through specialized advise coming from a seasoned debt advisor and money by getting better results in a shorter span of time.