Debt settlement is a process where a debtor negotiates with creditors to settle their debt for less than the full amount owed. This typically involves making a lump-sum payment that is less than the total outstanding balance in exchange for the creditor forgiving the remaining debt. Debt settlement can be done independently by the debtor or through a debt settlement company that negotiates on their behalf. While it can significantly reduce the total debt, debt settlement also has drawbacks, including a negative impact on credit scores, potential tax implications, and the risk of creditors refusing to settle. It is generally considered a last-resort option for those facing severe financial hardship and unable to keep up with their debt payments.
