What kind of debts can be settled?
Secured debts and guaranteed debts cannot be settled. The reason for this is that creditors who are secured or guaranteed lack any motivation to settle debts for less than 100 cents on the dollar. If a debtor defaults, the secured lender expects to recover the full amount due by seizing and selling the collateral that secured the loan. If there is a shortfall the remaining amount due becomes unsecured debt, which most lenders will then negotiate to settle e.g., an automobile is repossessed but cannot be resold for the full loan amount due, creating a deficiency balance that is unsecured. If a debtor defaults, a guaranteed lender looks to the guarantor to repay the outstanding balance in full e.g., student loans and the Federal Government, auto loans with a cosigner, SBA business loans and the Small Business Administration.
Secured debts and guaranteed debts cannot be settled. The reason for this is that creditors who are secured or guaranteed lack any motivation to settle debts for less than 100 cents on the dollar. If a debtor defaults, the secured lender expects to recover the full amount due by seizing and selling the collateral that secured the loan. If there is a shortfall the remaining amount due becomes unsecured debt, which most lenders will then negotiate to settle e.g., an automobile is repossessed but cannot be resold for the full loan amount due, creating a deficiency balance that is unsecured. If a debtor defaults, a guaranteed lender looks to the guarantor to repay the outstanding balance in full e.g., student loans and the Federal Government, auto loans with a cosigner, SBA business loans and the Small Business Administration.
