If you are over your head in debt, you may be in hurry to get out as fast as you can. Fortunately there are many fixes available such as bankruptcy or debt negotiation. Most people know bankruptcy will remain on a credit report for seven years, so debt negotiation seems like a less severe option. However, even though there are many good reasons to use the service, there are some viable reasons not to use the service as well.
Pro: It's Fast
A professional debt negotiation company will help you eliminate your debt for half the amount of money you owe. In exchange for an agreed-upon one time payment, the creditor will forgive the rest of the debt and report it to the bureaus as settled.
Con: Fees
Debt negotiation companies charge fees, notes the Better Business Bureau, and this is money that could have gone toward paying off your credit cards. Some companies charge a percentage of the total debt, about 15 to 18 percent, according to SmartMoney.
Con: You Can Get Sued
Often, once creditors realize a borrower is working with a debt settlement agency, they may escalate the account. That means the account could go to a collections agency or you can get sued. Debt negotiation agencies can't give you legal advice or representation in courts, so if you get sued, you're on your own.
Pro: It's Can Be Good if You Don't Qualify for Chapter 7 Bankruptcy
Usually people who qualify for Chapter 7 just don't have the amount of cash they would need to work with a debt negotiation company. If you are on your way to bankruptcy, but you don't qualify for chapter 7, and you're looking for an alternative to filing for chapter 13, debt negotiation may be for you, according to SmartMoney.
Con: Your Credit Report Will Show that You Paid Less Than the Amount Owed
According to Debtors Unite, your credit report will reflect you did not pay the entire balance owed. This will lower your credit score. And it will affect your report for the next seven years. A lower score means you might only be able to get credit cards with higher interest rates. If you're planning on getting a mortgage, that loan may be more expensive too.
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