What is Debt Resolution?
Debt resolution is a financial strategy that helps you negotiate with creditors to reduce your overall debt burden. This process primarily focuses on unsecured debts, which are not tied to any collateral. Through debt resolution, you can potentially pay less than the original balance, providing significant financial relief while avoiding bankruptcy.
How Does Debt Resolution Work?
The debt resolution process consists of several key steps. First, your financial situation is assessed to identify which debts are eligible for resolution. Next, DebtBusters negotiates with your creditors to reach an agreement on a reduced payment amount. Finally, this reduced amount can be settled either as a lump sum or through a structured payment plan, providing you with a manageable path to financial relief.
Common types of debts suitable for resolution include:
Credit Card Balances
The total amount owed to credit card issuers, which can fluctuate based on purchases and payments.
Medical Bills
Charges for healthcare services that can accumulate quickly and impact credit if unpaid.
Personal Loans
Unsecured loans from financial institutions used for various purposes, requiring repayment over time.
Department Store Charge Cards
Retail-specific credit cards with higher interest rates, allowing purchases on credit at a particular store.
Payday Loans
Short-term, high-interest loans designed to cover urgent expenses until the next paycheck, often leading to a cycle of debt.
Who Can Benefit from Debt Resolution?
Debt resolution is particularly suited for individuals grappling with significant unsecured debt who cannot make full payments. It is especially beneficial for those experiencing financial hardship due to job loss, medical expenses, or reduced income, as well as for individuals holding high amounts of unsecured debt. Additionally, it is designed for those who are capable of paying a reduced amount, whether as a lump sum or through structured payments, providing a viable solution to regain financial stability.
Advantages & Disadvantages
Disadvantages
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Potential Negative Impact on Credit Score
While reducing debt, the process may initially lower your credit score due to settled accounts. -
Possible Tax Consequences
Forgiven debt may be considered taxable income by the IRS, leading to additional tax liabilities. -
Not All Debts Can Be Resolved
Certain types of debts, particularly secured debts, are ineligible for resolution through this process.
Advantages
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Pay Less Than You Owe
Debt resolution allows you to settle your debts for a lower amount than the total owed, providing financial relief. -
Avoid Bankruptcy
This process offers an alternative to bankruptcy, helping you manage your debts without the long-term consequences of filing. -
Stop Collection Calls
Once a settlement is reached, creditors must cease collection efforts, alleviating the stress of constant calls. -
Resolve Debts Faster
Debt resolution can expedite the process of eliminating debts compared to making minimum payments over time.
FAQs
Debt resolution is effective for unsecured debts like credit card debt, medical bills, and personal loans. Secured debts are not eligible.
Debt resolution programs typically take between two and four years, depending on the amount of debt and negotiation progress.
Savings vary, but debt resolution often allows you to pay between 50% and 70% of the total debt. Individual circumstances and negotiation outcomes determine the exact amount.
Some creditors may continue applying interest and fees during negotiations. However, once an agreement is reached, additional charges stop, and you’re only responsible for the agreed-upon amount.
Debt resolution may initially lower your credit score, but as you complete the program and reduce your debt, your credit score can improve over time.
While it’s possible to negotiate with creditors yourself, professional debt resolution services often have more experience and resources to secure better outcomes.
If a creditor refuses to participate, your debt resolution company will work with you to explore alternative options for managing that specific debt.
