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A debt settlement agreement is a document utilized by creditors and debtors to settle and compromise upon the amount that can actually be paid back in a bad debt. The debt settlement agreement defines the original amount payable and the compromised settlement amount that is to be paid. The agreement also includes the time stipulated for the payments to be made and the method of payment. If the debtor fails to honor the contract, the entire original debt amount becomes due. The agreement also includes other clauses such as confidentiality or liability.
In essence, the agreement is basically the confirmation of the verbal agreement that one has with their creditor or collection agency. A particularly useful article denotes items which are important and need to be present in the debt settlement agreement. These important inclusions are Debt list (list of all accrued unsecured debts and details of accounts and identification), Settlement Funds Estimate (money required to be saved in a specific debt settlement fund), Debt Settlement Fee (amount of money the debt settlement company charges for its services in negotiations with creditors). It is important to note that all aspects of the Settlement Fee must be clearly elucidated. If there is any ambiguity, do not accept it. Monthly Installment Payments (the sum total of months to be taken to save for settlements). Services to be Rendered (a clear list of all services to be provided in lieu of the settlement). Cancellation Clause, Disclosure Statement, Debt Settlement Company Information, Service Provider Details and a Notice of Recession are other obligatory and imperative clauses of the agreement.
In the world of debt collection and debt relief, paying off debt through settlement without a valid legal document is a mistake that should not be made. If for any reason, the problem resurfaces, there needs to be evidence of the debt being resolved. The actual verbal agreement between creditors and debtors which culminates in actual settlement is one which results in relief towards both parties. However, one should not rest until the debt settlement agreement has been signed. One should clear one’s debts in entirety and that can only be possible with a debt settlement agreement.
Negotiations with creditors are normally verbal. The verbal agreement sets the terms and conditions of the settlement. The most important thing to note is that the agreement is not complete unless a document which concurs with the terms and conditions of the verbal agreement. Debt professionals constantly rephrase the age old axiom that without documentation, there should be no deal.
Debt settlement is an unfortunate avenue to have to undertake. It represents a certain failure and most consumers are loath to accept it. However, there are no excuses for taking the short route and curtailing on certain essentials along the way. Signing an agreement in concurrence with the terms and conditions that you have agreed to is the only possible way of going forward with debt settlement. All other forms are mostly illegal and often enough, can lead to cumbersome litigation which only costs more money.