Most debts fall into three categories: (1) an unsecured debt, where the creditor has no lien on your real or personal property, (2) a secured debt, where the creditor has a lien on your personal or real property (for example, a mortgage or auto loan)and (3) a judgment debt, where the creditor has sued you and obtained a judgment.

It is essential to know the difference when negotiating with creditors because the remedies available to creditors for these types of debt vary widely. For example, a creditor without a judgment may be in a weaker bargaining position than a judgment creditor.

There are several instances when you may want to consider debt settlement/debt negotiation over other alternatives. For example:

•          You could pay off the balances if settled for a greatly reduced amount.

•          You could pay the creditor under a reasonable payment plan.

•          You want to avoid having a bankruptcy on your credit report.

•          The debts are with just a few creditors.

•          You are ineligible to file for bankruptcy.

Debt settlement is most effective when the debts have been unpaid for a long time.

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