How Debts are Settled - Lump Sum Payments

Your monthly payments will be allocated to your savings/bank account. Some companies will charge you up front fees while other companies will not charge you until a debt is settled. Fee structures and the amount of months you pay the settlement company vary so make sure you find a company who has a fee structure and program that you are comfortable with. Settlement companies should offer to hold your savings in your own third party FDIC insured bank account. The money you apply to your settlement program will build up in this account over time and will be used to settle out your accounts. The more money you apply toward your debt settlement program then the quicker your savings will build up and the faster your accounts will be positioned for settlements. Most accounts are settled in lump sum amounts because creditors will often accept lower settlement percentages when funds are exchanged in full. This lump sum strategy is the reason to set up a structured savings plan in order to ensure your savings account will have accrued enough money to satisfy each lump sum payment. For example, if you are saving $1,000 per month and you have a credit card balance of $40,000, by month 15 to 20 you will likely have enough money saved up so that an settlement offer can be made on your account. Settlement companies cannot complete the negotiation process until the necessary funds have accrued within the client’s account and when a settlement is reached they will need your approval to accept the settlement and apply the money in your account towards the settlement.