What is Debt Settlement ?
Debt Settlement is a negotiated agreement by which a creditor accepts less than the total amount owed to legally satisfy a debt. Settlement programs typically last 24-48 months and are highly dependent on factors such as delinquency, creditor policies, the number of accounts, and the total dollar amount of the debt.
Debt settlement services have existed in some form since the advent of debt itself. The modern industry has seen significant growth in the 21st century, largely due to the easing of lending requirements by financial institutions. In addition, today’s borrowers are taking on significantly more debt than their parents had at a similar stage in life and are subsequently paying off that debt at a slower rate. [ECONOMIC INQUIRY, 2013]
These large debt loads and slower payoffs, coupled with today’s high-interest rates, mean that without intervention many borrowers could be paying off these loans for decades. While there are a multitude of interwoven causes for these trends, industry experts point to increased access to larger amounts of credit coupled with a reduction in the social stigma of being in debt.