Debt settlement, also known as debt arbitration is an approach to debt reduction in which the debtor and creditor agree on a reduced balance that will be regarded as payment in full. In debt settlement, the consumer makes monthly payments, out of which the debt settlement company takes its fees for the legal work or negotiation and payments are paid to the creditor. This debt settlement allows the public to spread payments out over a set term – instead of having to pay a lump sum in one go which is the case with Full and Final Settlement. But before meeting that final settlement, one often face problem to meet the both end. During this time they opt for the pre-settlement funding.
This funding follows a rigorous but easy-to-follow process. The debt settlement companies set up a third party “trust” account where funds accumulate for the settlement process. A legitimate company will use a Federal Deposit Insurance Corporation-insured trust account. Once enough funds are built up the negotiation process can begin with each creditor individually. Trust accounts, also known as “special purpose accounts,” are often held by a bank. These accounts are managed by a bank agent on a monthly maintenance fee. A consumer makes monthly payments either to the debt settlement company or to the bank or bank agent-the holder of the “trust” account. A portion of this “installment” payment is taken as fees for the debt settlement company while the rest is put into the trust account. The consumer is told not to pay anything to the creditors. Thus during pre-settlement funding, a well waived process is carried on to secure the interest of the both parties-the client and the lending company.
In matter of pre-settlement funding, structured settlement annuity proves a constant supply of money over an extended period of money, regardless of the economic situation. If the client or the suitor transfers the structured settlement, he or she will be able to have a large sum of money to be able to spend on bills, college tuition or for a new car or a deposit on a brand new home. In one word, the plaintiffs got limitless options. The selling of the structured settlement is beneficiary, if one wants to manage his or her own investments because the standard return on investment on structured settlements provides the option to have a large sum of money to manage his or her investments.
Thus, though the structured settlement and pre-settlement funding are different in approaches but they are connected somehow. One can always have the safety net of the annuity which gives him or her sense of security. Extending to this, the structured settlement is tax-free for a specific period of time. Due to the reliability of structured settlements, it is possibly a greater investment then most stocks, bonds and even in these hard times, real estate. You can get the settled flag off your credit report by paying the remaining amount at a later date. So during the prior period of a settlement the structured settlement proves to be much benefited to meet the daily needs and wants.