Debt Showdown - Debt Settlement

Tex was in debt. Learn how he settled the score.

How Tex Settled Up

One day when Tex was in the local saloon, in came two local merchants. They were looking for Tex. One of them said, "Tex, you owe us. And it's time to pay."

"But I don't have the money," he said. Luckily, Tex was there with a friend in the debt management industry. His friend was Buckeye Joe (Buck for short). "Excuse me fellas, I need to have a word with Tex here. Why don't y'all take a seat at the bar?" They did, and Buck asked Tex if he had any money at all saved up. He said he did, but it wasn't nearly enough to pay what he owed these guys. Buck asked how much he had, and Tex told him.

"This just might work," Buck said.

"What are you going to do?" Tex asked.

"Give me a minute," Buck said.

With that, Buck went over and talked to the merchants. When he came back, he told Tex that if he wants to settle the score with these merchants, they would accept whatever money he had in his savings and the debt would be settled. Tex did, and he was out of debt - without having to pay extra money to his debt settlement companies.

What this story illustrates is the earliest beginnings of debt settlement. These days, debt settlement works a little differently. First, you contact a debt settlement company. Once they determine from you what your resources are, they will use their negotiation skills to try and get your balances reduced to what you have saved. This sometimes results in overall balance reductions of anywhere from 60-80% off your total amount due. The only reason creditors agree to this is because they know the next step is usually bankruptcy, in which case they wouldn't get paid at all. At least through debt settlement, they get some of what they are owed. Still, they aren't thrilled, so they want you to pay the agreed-upon amount immediately. Chances are they won't issue credit to you again, and they will probably report your participation in a debt settlement program to the three credit reporting agencies, which will effect your credit in much the same way as a late payment. So before you jump right in to debt settlement, check out the other debt management options that are out there first.

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