To make things clearer, let’s distinguish between two major categories of debt: secured and unsecured. In the case of a secured debt, a valuable property, such as an automobile or a home, is offered as a promise to the creditor if the debtor is unable to make his payments, or defaults, on the loan. You will be unable to settle these debts, because the creditor will look at the promised property as the "settlement" itself.
Secured debts usually consist of:
- home mortgage and/or equity loan
- auto loan
- recreational vehicle loans (boats, RV's, etc)
One thing to note however, in most states, failure to redeem a bounced check can be criminally prosecuted. If you have any outstanding bounced checks, get these paid first, even if it means payment in full without reduction of the amount owed. Criminal charges will follow you for life, and could land you in jail!
Here are the two cases when the creditor will settle with you:- If the Creditor feels it is in the company's best interest to settle (you can persuade them it is their only chance to receive something)
- If they believe you do not possess many assets (there is no point in suing you because even if they win, there’s nothing they can collect from you).
