Debt settlement becomes very difficult if the creditor is not willing to be flexible. Flexibility is very important in trying to settle the debt because the rigidity of the creditor can affect the ability of the debtor to pay and reasonableness has to be applied in the light fashion.

Debt settlement for larger debts should always and must always be secured and the security itself normally will cover the amount of debt. The question arises that the security is an asset that the borrower wishes to keep the home or it’s a business entity and they don’t want to lose it. Then again, normally you get into a situation where they will have to look at restructuring or refinancing or the asset portfolio.

Okay, so we’re back on topic now, looking at all the pluses and the cons of raising finance to settle debt. First and foremost, what are the rules of settling debt?

Well, first of all, you do really need to know that you have sufficient ability to raise the funds. You’ve got to be confident that whatever the outcome is, if it’s with no discount or with any payment. If it is an installment or a payment plan for the debt, do you have sufficient equity available to pay it off, whether in one go or over a period of time?

There’s hardly any point in trying to reach a settlement of your debt with any creditor knowing that you will be back in that position in a few months. If anything, it takes away your credit in front of your creditor. It makes you look somewhat weak where the creditor may think that you’re not exactly clear about the information you’re presenting and your ability to pay back.

 Your money is not subject to equity. It’s merely subject to your bad management of money in a bad business practice. So it’s very important to, first of all, realize are you in a position to pay the debt?

If you are, then it makes it easy for you to at least enter into negotiations with the creditor, knowing that you can pay off all, if not most of the debt with a mind to paying the debt involved. So let’s go to a separate second matter. First, you’ve just worked out whether you have the money to pay off the debt in full or at least if not full majority of it, and the remainder may be subject to negotiation.

The creditors themselves are in financial difficulty. They hardly need any position in trying to claim a debt. Once they themselves own severe serious debt, they have to pay off. So it becomes somewhat the catch 22 situation. But leaving that aside, taking all these matters away, and the creditors. Obviously, assessment of the debt and the financial affordability of the debtor will determine whether debt settlement can take place on amicable terms on pre negotiated terms that both parties can manage.

Then we come on to the time. It’s important! You can say you want to pay the debt, but if you want to pay an unreasonable time that the creditor doesn’t have the benefit of that money. Normally, debt settlement is difficult.

The debt settlement isn’t just about paying the money. It’s about paying the money in time. Now, the word in time or within a reasonable time you can call it is maybe one of the major contested items index.

So the period is very important to know because it’s the difference between debt being settled or accepted to settle and debt being a debt. So bit of good advice is make sure the terms of that settlement are reasonable. After we’ve cleared the reason the timing of payment, we look at our own credit conditioning. So in order to be able to raise money to pay for that, you need to have good credit file. Credit file is key to everything.

Is a good credit file important?

Without a good credit file, you’re not going to get money from your assets. Someone’s going to trust you to pay you any money. You got to make sure you put on top of your credit while your credit file should be good. And on the strong side for the bank is confident about giving you money because you can genuinely pay it back. I’m inviting anyone.

Got a question to answer this topic?

Please talk to us. We know it’s been a stressful month. A couple of weeks left. But believe me, a lot of us are sitting there much stressed, tentative about the New Year and about the upcoming prospects of losing your business or your home is quite daunting.