Tag Archives: Debt Settlement
Debt collectors are tough, seasoned professionals and they are well trained in collecting consumer debts. When you are getting regular collection calls from the different debt collectors, you need to be well prepared on how to tackle the situation and negotiate with them for a settlement amount. These collectors are talking with many people on a daily basis and they are used to hear the common reasons given by other debts, so you need to give a very convincing logic while you initiate negotiations with them.
Before starting your negotiations with the debt collectors, you need to study your sources of income, savings and the amount of your debt and how much of it can you afford to repay. Also you need to look at your current expenses and see which bills are most unavoidable and needs to be paid, while allocating the amount for repayment. You can go through your credit report provided by the credit bureaus and check for any inaccuracies or outdated information. Incorrect information on your credit report will hurt your credit scores, so get it fixed at your earliest. You should be aware about your rights as a debtor by going through the debt collection fair practices act. It will make you as an informed consumer, and if any collection agency is violating the federal or state laws, you can take immediate actions against them using the laws as your legal weapon against them.
When you start a negotiation with a creditor, start with the lowest amount and then you can increase it, as and when required. You can start with a settlement offer of 40% of your original debt, and explain them about your situation why you had fallen behind in your payments in the past and other things that forced you to get into a situation like this in the present. Do not give out your personal information like your place of work, name and address of your bank and your banking details. While talking with these people, stay calm and focused and be polite during your conversations.
It is a good idea to tell the creditors that you are recording the conversations for future proof. This will keep them in the best of their behavior. You must maintain a creditor call log and put details about every person you speak with from that company with date and time. During the negotiation process, you can ask the creditor to remove any negative information reported by them to the credit bureaus and insist them to do a fair reporting on your credit report.
Once the settlement amount is finalized, you must ask for the settlement proposal in writing with details on the new amount agreed on, new terms of the repayment, as well as any other terms agreed by both of you. Keep the information in your file for future records. Do not make any sort of payment until you have proof of the settlement offer in writing.
Debt settlement is a legitimate alternative to filing bankruptcy. If anyone is going through serious financial hardship and has overwhelming debts on their heads, it is time to get professional help.
Debt settlement consumer protection act has many benefits for the individuals. After the Federal economy was hit by the one of the biggest recessions, thousands of people became jobless in no matter of time. Many people had to go through great financial crisis. They were not able to repay their debts and became defaulters. They were eventually forced to file for bankruptcy and had to compromise with their high credit scores. Once they lost their credibility, they failed to get any good deals from the future lenders for the next 7 – 10 years that followed.
On the other hand, the creditors also took the hit of the recession. As the number of people of people filing for bankruptcy was increasing alarmingly, the creditors lost their liquidity and they failed to manage their costs. The financial equilibrium was disbalanced and almost reached the verge of bankruptcy. The economy took the biggest hit of all times and rolled further back into recession. The federal government had to take immediate steps to curb this situation.
As a part of the debt settlement consumer protection act, the government introduced tax breaks for the creditors and also released billions of US dollars into the economy. It was made public that those creditors who will agree for settlement with the consumers will get huge discount in taxes and can use the stimulus money released in the market to cover up the costs and the loss that they incur.
As a result of these changes in the laws, many creditors offered debt settlement deals and wiped out a certain percentage of the debts of the consumers. They had to incur loss but that was later covered by the government policies of tax breaks and stimulus cash.
Consumers on the other hand, were able to reduce their debts by a great margin through debt relief options. The only condition that they had to fulfill was to have an overall consolidated loan of $10,000 or more. Anything less than that is not entertained for settlement. Once a good deal is offered to the debtor, they need to pay the remaining amount of the debt to the creditor in one single payment. In this way, many consumers were benefitted by the debt settlement consumer protection act.
People having significant amount of unsecured debt more than $10,000 can try the debt settlement option as a legitimate way of eliminating their debts. You can talk with a trained debt counselor and gain more knowledge in this regard. The debt counselor will point you in the right direction as per your situation.
Debt settlement programs were once done by you/your lawyer with creditors. Today, people are overwhelmed with rising mortgage rates, losing a job, rising credit rates and higher prices in utilities, food, and gas. Many found themselves deep in debt. Add penalties, late bank fees, credit cards, and car payments, insurance; you get the picture.
Bankruptcy is one answer, but leads to other problems. Credit becomes difficult to acquire for seven years for Chapter 7, and anytime during repayment of Chapter 13. Bankruptcies reached 1.5 million nationwide by the end of 2009, says the American Bankruptcy Institute. ‘”Next year’s bankruptcy numbers will probably be close to this year’s,” said Dr. Bernard Weinstein, professor of business economics, Cox School of Business at Southern Methodist University in Dallas.” Today, the best way to get out of debt quickly is a program called, debt settlement. However, it’s not without its drawbacks. There are two things to worry about. First, is cost. Companies charge 10-15% of the debt up front. This can turn your financial situation from bad to worse.
The second is the damage done to your credit report. “Debt settlement will show negatively on your report. But, is still better than bankruptcy, which makes a bigger dent in credibility”.
You’ll make one payment a month. You stop using credit cards, learn to budget and live within your means. The company gets penalties reduced/eliminated and lowers interest on everything outstanding. They reduce home loan interest; payments go down, while in repayment mode. In most states (except Texas) there is no collection agency harassment while making payments. You talk only to the debt settlement company, having the experience and carrot for creditors. The idea is that some money is better than none. Within a few years, debt is reduced significantly through effective negotiation and distribution.
Credit card debt is an epidemic which broke out quite a few decades back in the U.S. it has always been on the rise and is literally damaging the system very badly like a virus. Be it any kind of unsecured debt like a credit card or payday loans, it is a kind of vice in itself. Since this line of credit or the personal loans are easily available, people do not realize the mistake until their line of credit is exhausted or is on the verge of exhaustion. They understand it only when the monthly payments keep on going higher. In order to reduce these concerns, debt settlement option is the best recourse.
The question now arises that of, how would you know when is the right time to decide that one needs a debt settlement solution. The answer to this question is hidden in the question itself. You are the final decider who will decide for yourself! But if you go through one or more of the instances given below and feel that you are in the same situation, then debt settlement program is highly recommended.
• If you think that your shoulders are stooping down with the burden of your debts, then it is the right time.
• Again if most of your cards have reached their maximum limits, then it is the right time.
• If you are too much dependant on your credit card.
• Credit card is a necessity to you as you need the funds badly, because you are short of it.
Ultimately you start hiding your guilt and end up in collections. You change your phone numbers (and address in some acute cases). This will further add to your worries. You start getting cash advances to pay off your monthly payments and other credit card bills. You will land up to a situation where you will feel suffocated with all these debts building up and you will be forced to file for a bankruptcy. Repercussions of bankruptcy are unbearable. If you want to try the final resort before doing a bankruptcy, then debt settlement is the best alternative.
All you need to remember is that, be it a credit card or an online debt, you have to pay it back. So transferring balances from one credit card to another is not a resolution. It will not solve your problem of debts. It may even lead you to larger amount of debts. However if debt settlement is the word on your mind, then to have a basic understanding of how it will work for you, here are some important tips that can be beneficial to you while choosing a debt settlement service:
• First research and choose a firm which provides its debt settlement services genuinely. See whether it is interested in only making money from you.
• Sign up with a debt settlement program after you are convinced that your search ends there.
• Start by defaulting on your payments. This is because the creditors will notice it only if the payments late.
• In a debt settlement program, all you need is to make payment(s) towards a trust account with the settlement firm.
• Now this amount gets accumulated as a reserve.
• This pool of money then is used to make payments to your creditors.
• Once the firm or a company takes over from you, then you may not get calls from a collection agency. This is because a professional takes over from you after that as your representative.
• Negotiations start precisely after you have made your first payment.
Nevertheless debt settlement is not at all a flawless solution. It comes with its own disadvantages:
a) No denying the fact that this will affect your credit score as you are going delinquent with your accounts.
b) It is to be noted that Internal Revenue System levies tax on the saved loan amount (i.e. the amount that was waived off to you).
To wake up debt free tomorrow, start organizing your debts today. Only you can help yourself. It is not only about debt settlement or management. It is actually about your pride and dignity which are at stake. Either through a call or by a mail, no one likes to be nagged about payments on a regular basis. It will only add to your worries, if you are being called day in and out for credit card, online or any other debts, talk to a debt counselor and work out suitable repayment plans to pay off your existing debts.
Everyone wants to pay their bills what they owe to their creditors, but there are times when many of us go through real financial problems like loss of a job, medical problems, or divorce. These reasons can spin your overall financial situation out of control. You try to negotiate with your creditors and work out a payment plan but you cannot be always successful in satisfying your creditors. In such situation, when you really want to get out of debts, debt settlement program can be better option
Debt settlement, also known as debt negotiation program, can take many forms. This program will eliminate your existing debts; repair your tarnished credit and helps in achieving your financial dreams, such as buying a car or a home of your own. This option is the best resort before filing for bankruptcy.
Most people are not aware about this program and they finally decide to go through the bankruptcy route. Once bankruptcy shows up on your credit report, this negative remark can haunt you for the rest of your life. If you would like to pay off the full principal amount at reduced interest rates, perhaps you can choose a debt management program. This will keep your accounts current without doing too much damage on your credit ratings. Keep in mind that the monthly payments in the debt management program are going to be higher because you are going to pay the full principal amount as well as the interests and keep the accounts current.
Debt settlement program can knock down the total balance to something less than half. It’s a low cost solution to gaining relief from debt payments. Speak to a debt counselor who will analyze your present financial situation, calculate your income and expenses and figure out how much you can afford in your monthly payments to get the outstanding balance settled with your creditors. He will negotiate with your creditors and explain about your present debt related problems. After negotiating with your creditors, he will work out a lower monthly payment plan and save at least half of the total balance in this program.
Some credit counselors feel that debt settlement program is a very good option for someone who is already overwhelmed by his existing debts and cannot afford to keep his accounts current. This program is best suited for someone when he is already confronted with bad credit problems and is getting regular collection calls. The process of debt settlement starts by negotiating with the creditors for the borrowers’ accounts due to his inability to pay the balance in full. The overall idea is to reduce the total balance and the lower monthly payment plan will help to pay off the debts faster. Credit card debt settlement company will negotiate with the creditors on behalf of the borrower to lower the balances and put it in an affordable monthly payment plan after the settlement proposal is finalized. Effects of debt settlement or better known as debt negotiation program have its own set of advantages as well as disadvantages.
- Advantages of credit card debt settlement program:
1. The immediate effect of the debt settlement is that the part of the debt is wiped out by your creditor. This will help you to review your monthly budget and managing monthly debt payments.
2. When you are enrolled in a debt relief program, many of the creditors will try to re-age your accounts and bring it to a current status.
3. Debt settlement program will eliminate the interests and fees from the outstanding balance, thereby making the monthly payments quite lower and affordable.
4. This program will also eliminate the over limit fees.
5. By signing up in the debt settlement program, you can actually get the help of the debt settlement company negotiating with your creditors and thereby stop collection calls, reducing most of the tensions of your life.
- Disadvantages of the debt settlement program:
1. Though debt settlement program can be very helpful in eliminating your debts, keep in mind this program has a severe effect on your credit ratings. If you are just fallen behind in your monthly payments to your creditors, these accounts will have to fall delinquent for a certain period of time before you can get substantial discounts from your creditors. Thus, your credit scores are expected to fall, if it had been good in the past, while you are in this program.
2. When your debts are reduced in the credit card debt settlement program, the balance waived off is showed as an income and you are required to file taxes on it.
3. When you are enrolled in the debt settlement program, you should be having enough balance over a certain period of time so that the settlement proposal can be finalized with the creditor. If it is put on a payment plan, make sure that you stick to it. Defaulting in the payment plan will void the settlement offer.
By signing for a debt settlement program when your credit is already tarnished, you will find there is a way to improve your credit ratings after your accounts are paid off one by one and when they are reported to the credit bureaus. It help you to focus on managing your credit better Instead of juggling late payments, high debts loads, and other factors.