What is Debt Settlement? Meaning, Definition, Benefits
What is debt settlement?
Before initiating our discussion regarding what is debt settlement?s First let's revise the meaning of two words it is made of.
Debt settlement is a union of two words namely:
- Debt and
- Settlement.
The individual meaning of these two words is as follows:
- Debt means the total amount of money borrowed by an entity like an individual, company, firm, and so on.
- Settlement implies an agreement between two or more parties to resolve issues between them.
So based on the above understanding now let's try to conclude the meaning of debt settlement.
Debt settlement means to make an agreement or do a settlement in relation with the sum of money borrowed and lent between the parties.
Debt settlement acts as a relief from the burden of debt, and it is also an alternative solution to the worst case of bankruptcy (insolvency).
Figure 1. What is debt settlement? Image credits © Prof. Mudit Katyani.