A: While all debt actions can impact credit scores, negotiating an account status as "paid in full" with your creditors can minimize adverse effects.
The effect of a debt settlement may be minimal if you are settling modest accounts, mainly if you are current on other, larger loans.
A: Eligibility typically depends on the amount and type of unsecured debt. Discussing your financial situation with our counselors can provide clarity. At the end of the free counseling session, we will let you know if you qualify for the program and, if not, what other options you may consider.
A: Only private student loans can be settled.
A: Fees vary, but debt settlement companies generally charge between 15% and 40% of the settled debt.
A: Regularly monitor your credit report, ensure all settled debts are accurately reported, maintain current accounts in good standing, consider secured credit cards, and keep low balances on existing cards.
A: Credit score improvement can range from 6 months to 2 years, depending on individual financial behaviors post-settlement.
A: Secured debts are tied to collateral like homes or cars, while assets don't back unsecured debts. The creditor may seize the collateral if you default on a secured debt.
A: Debt settlement is a strategy where one negotiates with creditors to pay a reduced amount of what's owed. Typically, this involves persuading creditors to accept a lump sum that's less than the total debt.
A: Debt settlement comes with potential pitfalls:
A: While most unsecured debts, such as credit card balances, medical bills, and payday loans, can be negotiated, secured debts like mortgages or car loans aren't typically included.
A: While debt settlement focuses on reducing the total debt through negotiation, debt consolidation combines multiple debts into one loan, usually at a lower interest rate.
A: Yes, you can. However, professional guidance might help if you're unfamiliar or uncomfortable with the negotiation process.
A: If a creditor is unwilling to negotiate, you might need to explore other options, including making payments, negotiating with other creditors, or considering bankruptcy.
A: Your credit score might initially drop when you stop making payments and begin the settlement process. However, as settled debts are reported as "settled" or "paid," your score should gradually improve. However, settling current, non-delinquent accounts can have a more significant negative impact.
A: Our program caters to current and delinquent account holders.
A: While we aim to negotiate all unsecured debts, settlements aren't guaranteed. Secured debts, student loans, and certain government-imposed debts like taxes or child support are typically off the table.
A: Successful negotiations can lead to a reduction in debt, typically ranging from 40% to 50% of the original amount. If you get lucky, you could even save 80% of the debt amount.
A: While the goal is to eliminate all enrolled unsecured debt, you'll still be accountable for secured and unsecured debts not included in our program.
A: Both options have implications. Analyzing your financial situation, potential recovery time, and long-term goals can guide your decision. Tools, like our budgeting tool, can help.
A: Typically, our programs span between 15 and 36 months, but individual timelines vary based on several factors.
A: Yes, but our experienced negotiators often work to eliminate or reduce these charges during the settlement process.
A: Forgiven debt amounts might be considered taxable income. While creditors report these to the IRS, under specific insolvency criteria, you might be exempted. Consult with a tax professional to understand your obligations.
A: Use online searches, seek personal recommendations, contact local bar associations, check online legal directories, review ratings, interview potential attorneys, verify their licenses, discuss fees, and review the retainer agreement.
A: Pros: Include debt reduction, resolution of unsecured debt, faster relief, and being a bankruptcy alternative.
Cons: Include potential credit score impact, uncertainty of creditor agreement, fees, tax implications, legal risks, and continued creditor contact.
A: Risks include lowered credit scores, IRS bills, challenges obtaining future mortgages, and specific conditions regarding auto loan settlements.
A: Fees can include service fees, settlement fees, cancellation fees, legal fees, and maintenance fees. Reviewing the specific fee structure of any company or attorney you consider is essential.
A: Typically, it takes 2 to 4 years but varies based on individual circumstances.
A: Success depends on factors like the amount of debt, negotiation skills, financial hardships, and creditor willingness. A 700 credit score might be advantageous during negotiations.
A: Typically, once a debt is settled and reported as such, it shouldn't reappear as an outstanding debt. However, you can dispute it with the credit bureau if it does.
A: Both have their advantages and consequences. While debt settlement might have a shorter-term negative effect on your credit score, bankruptcy can remain on your credit report for up to 10 years. The best choice depends on the individual financial situation.
A: Research the company online, check for reviews, ensure they have no unresolved complaints with the Better Business Bureau, and verify they comply with the Federal Trade Commission’s regulations.
A: In some cases, yes. The IRS may view forgiven debt above $600 as taxable income, and you could receive a 1099-C form.
A: Yes, you can negotiate directly with your creditors. Some people choose to do this to avoid agency fees, but it can be time-consuming and requires a good understanding of negotiation tactics.
A: You can apply immediately after settling debt, but approval odds and interest rates might be unfavorable. It's often recommended to wait and rebuild your credit score first.