What is debt settlement?

Answer:
Debt settlement, also known as debt arbitration

or debt negotiation, is an approach to debt reduction in which the debtor and creditor agree to a reduced balance that will be regarded as payment in full.

Debt settlement is usually negotiated when an individual or a company can no longer pay the minimum monthly balance on a loan, credit card, or other debt. Debt settlements become more common when the economy slows down or when a person loses their job.

Debt settlements are usually arranged by a financial instution or a person certified to act as a financial entity, with that institution or individual being the middleman between the debtor and the creditor.