Debt Negotiation or Debt Elimination is considered a specialty service, which is mostly offered to people who "fall out" of a debt consolidation program, can't make the minimum payment of a debt consolidation program, or have large outstanding debts on which they haven't paid in the past 3 months. The main benefit of a debt negotiation service is that clients usually only pay around 50% of the amount they owe to their creditors. However there are some downsides to debt negotiation too. Once you sign up for a debt negotiation program you stop making payments to your creditors. The debt negotiation company then takes monthly payments from you, which it stores up in a holding account, or it has you store up the money in your own account. During this process of accumulation, the debt negotiation company is handling your creditor calls and negotiating with your creditors for a lower payoff amount, typically around the 40-50% range. Once a settlement is reached with your creditors, a lump sum payment is made to them. Most debt negotiation companies also require the creditor mark the credit report as "paid in full" so it doesn't show up negative on your report once it is settled. The downsides of debt negotiation programs are: 1. Your credit will be awful while you're in the program. 2. If the creditor never agrees to settle then you end up with bad credit, and in worse shape than where you were before.
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