Credit Card Debt Settlement - Debt Workout vs. Debt Consolidation
If you want a credit card debt settlement plan which one should you choose? What is the difference between a 'debt workout' and a 'debt consolidation' plan? A debt workout plan is a negotiated settlement of the credit card debt you have.
If a person owes $5000 on their credit card and negotiated with their company to pay $2000 instead as a full settlement it would be classed as a credit card debt workout settlement. This type of negotiation is typically handled by companies who call themselves a debt management, debt reduction, debt relief, debt workout, credit card debt settlement
company. They might even call this type of process 'debt consolidation'.
However, true Credit Card Debt Consolidation
is not the same thing. A credit card debt settlement
plan that consolidates debt aims at reorganizing debt via a credit counseling agency. Here, individuals work with a counselor to draw up a budget to pay off outstanding debts and will negotiate with your creditors on your behalf.
It might also entail plans that require making a debt consolidation loan to pay the full amount of debt owed.
Are you eligible for a debt workout as a form of credit card debt
settlement? It depends. If your creditor feels that a debt workout plan will benefit them in the long run they might agree to relieve your debt this way. This usually happens when it is clear that they are unlikely to get the full amount repaid at all. In most cases this is because the person who owes the money is probably going to file for bankruptcy. When a person does this the creditor is unlikely to receive any money at all and may opt for a lesser amount as opposed to a complete default.
If you are headed for bankruptcy and want to keep a clean credit record you might consider a debt workout as a credit card debt
settlement plan. However if you have a limited budget and want to pay all your creditors an affordable amount each month you might be better off approaching a debt consolidation agency. In this way you will be able to keep your credit report clean and your creditors happy. Consult a non-profit agency to help you with a debt consolidation plan that works for you.
