How Long Will Debt Settlement Stay on My Credit?

If you are in a financial situation where you are struggling to repay debt, you may be exploring options for getting out of debt, including having your debt forgiven or discharged. In a debt settlement, a portion of your debt is forgiven in exchange for your agreement to pay the remaining portion of your debt to the creditor, usually up front. Debt in this type of agreement is not discharged. Debt discharge occurs in bankruptcy, which does not involve a creditor forgiving debt but instead a bankruptcy court determining that certain debts should be discharged, meaning that the debtor is no longer liable for those debts.

You may know that a bankruptcy filing will remain on your credit report for a specific period of time, usually 7 or 10 years depending on the type of bankruptcy. Rather than filing for bankruptcy and contending with the financial and credit consequences, you may be considering debt settlement instead. Debt settlement might be a particularly good option if you have the ability to make a lump-sum payment to a creditor for a percentage of the debt owed. But if you want to avoid bankruptcy and reach a debt settlement agreement instead, you may still be concerned about your credit and may be wondering: how long will debt settlement stay on my credit?

Unlike a bankruptcy filing, the act of debt settlement — which involves paying a portion of debt and having the remaining portion forgiven — does not do significant harm to your credit like a bankruptcy filing. At the same time, your credit report will show a “settled” debt. Our Lilburn debt settlement lawyers can explain in more detail.

Debt Settlement Itself Will Not Substantially Harm Your Credit

Any settled accounts will appear on your credit report. However, the harm that settled accounts do to your credit is much less significant than a bankruptcy filing, and also usually less substantial than a late payment itself.

Although debt settlement will be indicated on your credit, and information about a settled account can remain on your credit for up to seven years, settling your debt might ultimately improve your credit in the long run. This is because you will owe less debt, and you will be using a smaller percentage of your available credit.

Past-Due Payments and Delinquencies That Lead to Debt Settlement Can Impact Your Credit Significantly

Some of the major negative information in the credit report of a debtor who opts for a debt settlement agreement are the results of past-due payments and delinquencies — the unpaid debt that led to their debt settlement agreement with the creditor. Delinquencies can stay on your credit for up to 7 years, depending on the circumstances.

Past-due payments or delinquencies remain on your credit — even after your debt settlement. Settling your debt will not make your recent credit history disappear.

Contact a Lilburn Debt Settlement Lawyer for Help with Your Debt

If you are considering debt settlement and other debt relief options, it is important to keep in mind that debt settlement will impact your credit much less than a bankruptcy filing and certain other potential debt relief options. An experienced Georgia debt settlement attorney at Konn Law Firm LLC can speak with you today about negotiating a debt settlement agreement with your creditor or creditors.

Source:

chase.com/personal/credit-cards/education/basics/how-will-settling-credit-card-debt-affect-credit