Regardless of the economic cycle, a subset of consumers will inevitably experience financial hardship due to factors such as income disruption, rising living costs, or excessive leverage. As labor markets weaken and consumer debt balances reach all-time highs, the number of financially strained consumers is increasing. For some consumers facing financial stress, entering into a debt settlement agreement with their creditor(s) may offer a viable alternative to bankruptcy and provide a path to financial stability, while also allowing creditors to recover a portion of the outstanding debt.
While consumers can negotiate debt settlement directly with their creditor(s), many turn to debt settlement companies (DSC) to help manage the process—a service typically provided for a fee upon successful settlement. An established securitization market already exists for loans extended to consumers enrolled in a debt settlement program. The loan purpose is to fund the remaining negotiated settlements…