At No More Mortgage we get asked about debt settlement often.

Many of the people that call us have asked about debt settlement and if they should consider it. Let's look at one of main points to consider when looking at Debt Settlement.

A main determining factor is whether you are cash flow positive or cash flow negative. If you make enough money to pay your bills every month and are not falling behind, consider yourself cash flow even or positive. Now you may not be making any headway at this point but you aren't falling further behind every month on your debt payments. If this describes you then you could most likely use a program like our fully administered debt management program to accelerate the payoff of your debts and get on track to becoming completely debt free.

If you are cash flow negative you don't have enough money to cover your bills every month. You're either about to or are already falling further behind on your payments every month. That is when you would consider debt settlement. The settlement agent or company will negotiate on your behalf with the creditors and work out a plan to get your debt settled with monthly payments that will be a percentage of what you owe.  This could give you the time you need to get back on your feet and avoid bankruptcy or law suits from your creditors.

Debt Settlement companies will work with your unsecured debt. If you have secured debt like an auto loan or something that can be taken back by the creditor, they generally aren't able to do anything with those debts. They primarily work with unsecured debt like credit card debt. Credit card debt is extremely common and unsecured. It's also the type of debt these companies are geared towards settling. They have a pretty good idea how much each creditor will take through past experience and can give you a pretty good idea of how long it will take to settle these debts and how much you'll pay including the settlement company's fee.

Let's look at the negatives of debt settlement. First, your credit score is going to take some hard hits for each debt you are settling which should be pretty harsh for the first two years and then taper off over time. So don't plan on getting new credit anytime soon. If you are able to qualify for it, your interest rates are going to be higher and it will cost you more money to use credit for a few to possible several years. The amount of extra money you pay in higher interest rates could easily be far more than what you saved in debt settlement.

Often debt settlement is looked at as the last step before bankruptcy. What you need to think about is if settlement will help you avoid bankruptcy or if it is inevitable anyway. If you are not going to be able to avoid bankruptcy then you may be far better off to skip settlement and start talking to a bankruptcy attorney first. There is no reason to spend money on settlement fees and partially paying creditors if you are goin to have to pay for bankruptcy and go through it anyway.

That's why you should consider talking to a bankruptcy attorney in addition to a settlement company if you fear you may have to go through bankruptcy.

At No More Mortgage, we talk to people in all types of financial situations every day. We specialize in helping someone who is cash flow positive to get on track to becoming debt free. And we refer people to other partners when our service is not what they need.

What is most important is that you get all of the information you need before making what will be a huge decision affecting your financial future. Remember, don't rush into a decision, take the time to look at the pluses and minuses, and ask questions.

Your friends at No More Mortgage.

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