If you are behind on your debt, you may have been told that a debt settlement could be an option. Debt settlements are when a creditor is willing to settle your debt for less than is actually owed. For example, if you owe $10,000 in credit card debt that is way past due, the credit card company may accept a one-time payment of $7500 as ‘payment in full.’

On the surface, this certainly sounds like a great option. You can save a lot of money, and get your debts paid off quickly. And, in some cases it can actually be a good strategy for getting out of debt more quickly. Having a fuller understanding of how this type of thing works, and what potential issues with it there may be, is an important step in deciding if it is right for you.

If you have a large debt that is six or more months behind, your creditors may be willing to consider a debt settlement in NYC, Brooklyn, or the surrounding area. In most cases, this is really only an option on higher balance credit card debt and other unsecured debts. The biggest problem with debt settlements is that it requires you to have a large sum of money available to make the payoff amount.

If you owe $25,000 and the creditor says they will accept $10,000, it may seem like a perfect option. If you don’t have $10,000 laying around to pay the money, however, it isn’t even an option. Since most people with large sums of money sitting in an account aren’t behind on their bills, this is rarely a realistic option. The one exception could be if you suddenly came into a large sum of money from an inheritance or other one-time event. When this is the case, debt settlements can be a reasonable option to consider.