Definition - What does Debt Settlement mean?
Debt settlement is the process in which a debtor attempts to negotiate the forgiveness of all or part of their debt with an individual creditor. Debt settlement can also involve the restructuring or the adjustment of debt.
In the context of the law, debtors are legally obligated to meet the criteria of a debt settlement if one is reached.
Justipedia explains Debt Settlement
Typically, if a debt settlement is agreed to by the lender and the borrower, then certain circumstances are required to be conformed to by the debtor. For example, a debtor with a $100,000 debt to repay could have that amount decreased to $85,000 in a debt settlement, if they agree to pay the full sum in one year.
Debtors usually attempt to get debt settlements if they are struggling to repay the debts that they owe. Settlements are not always granted, however.
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