Settlement Types
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Debt & Credit Settlements
Debt settlement, also known as debt arbitration, debt negotiation or credit settlement, is an approach to debt reduction in which the debtor and creditor agree on a reduced balance that will be regarded as payment in full.
Debt settlement is often confused with debt consolidation. In debt consolidation, the consumer makes monthly payments to the debt consolidator, who takes a fee and passes the rest of the payment to the creditors, so creditors continue to receive payments each month.
In debt settlement, the consumer makes monthly payments, out of which the debt settlement company takes its fees. The remainder is put into a trust or special-purpose account. The creditors get nothing until they decide to settle.