Is debt settlement a good idea and how does the process work?
Debt settlement is a good idea for people who want to get out of debt fast by paying a fraction of the outstanding balance on their credit cards, payday loans, and medical bills. It is an agreement where the creditor forgives a portion of the debt due to the debtor's financial hardship.
Table of Contents
- Is debt settlement a good idea and how does the process work?
- What is a debt settlement program?
- How does our debt settlement process work?
- How can I help to settle your debt?
- What other services does my team offer?
- What are the debt settlement pros and cons ?
- Is debt settlement a good idea?
- When should you consider debt settlement?
- Why should you consult a debt settlement attorney?
- What are the key debt settlement laws you should be aware of?
- How can you choose the best debt settlement company?
- What should you do before you settle debt with a debt collector?
- How much will debt collectors settle for?
- What are the debt settlement options?
- Related resources where you can get debt settlement help and advice
What is a debt settlement program?
A debt settlement program (also known as a debt settlement plan or a debt resolution program) is a legal bill repayment method that helps consumers and creditors avoid bankruptcy.
In this program, a law firm or a settlement company negotiates with creditors on behalf of consumers to reduce their payoff amount, late fees, and fines. Once a creditor agrees to accept less than the total debt amount as full payment, a settlement agreement is signed by both the parties. The consumers pay the agreed upon amount in a lump sum by a certain date, and get rid of credit card bills.
How does our debt settlement process work?
Once you contact us:
- My assistant will take down the details of all your unsecured debts.
- I will review your file and contact your creditors. I will inform all of them that they cannot harass you anymore.
- Most of the creditors, once they know I am representing you, will settle your debt at very favorable terms.
- I will have you work with my assistant to make payments to the creditor.
- You will be debt-free in three to four months.
How can I help to settle your debt?
I have helped people like you:
- Reduce total debt amount
- Eliminate late fees, advance fees, extra fees
- Avoid collection calls
- Avoid debt collection lawsuits
What other services does my team offer?
- Debt consolidation
- Debt management
- Relief from collection abuse
- Consumer bankruptcy
- Payday loan consolidation
- Credit card settlement
- Payday loan settlement
What are the debt settlement pros and cons ?
- Save a lot of money.
- Creditors are less aggressive.
- Avoid collection calls and bankruptcy.
- Late fees and penalties get dropped.
- Get out of credit card debt within 3 years.
- Repay debts through affordable single monthly payments.
- Your credit score will drop at first.
- When you save more than $600, you'll have to pay tax on the savings.
- You have to abide by the settlement agreement.
Is debt settlement a good idea?
Whether you opt for DIY debt settlement or get help from professionals, this debt relief option helps you save money. However, your credit score is likely to drop by a few points after your debt is settled. The drop is marginal because your credit score is likely already low due to delinquent accounts and negative items on your credit report.
You also have to pay tax to the Internal Revenue Service (IRS) when a credit card company agrees to reduce your debt amount by more than $600. So, you may have to set aside money for taxes after settling a credit card debt.
However, through debt resolution, you can solve your debt problems fast. After you become debt-free, you can start managing your finances efficiently and adding positive items to your credit report. It will help you improve your credit score with time.Back To Index
When should you consider debt settlement?
- When you have credit card debt, payday loans, collection accounts, medical bills, etc.
- When creditors are threatening to file lawsuits against you.
- When you want your creditors to accept less than what you owe.
Why should you consult a debt settlement attorney?
A good debt settlement attorney has years of experience settling debt. They have the training, knowledge, and expertise to understand the ins and outs of debt negotiation. A skilled attorney can apply that knowledge and experience to your specific situation.
And that's just the tip of the iceberg.
Here are a few other reasons to consult a lawyer to help you settle your debt:
- You won't have to deal with collection calls. The collectors will be required to work with your attorney.
- Attorneys know what creditors can and can't do. They know how to negotiate with creditors to settle your debt in the most challenging situations.
- They know the latest FTC rules by heart, including some you might not know even exist.
- Attorneys are trained negotiators. They are very likely to save more for you than you can save for yourself.
- They know how to negotiate a settlement with credit card companies even if they file a lawsuit against you.
- They can safeguard you from collection harassment and online debt settlement scams.
- If collection agencies try to scam you, an attorney can file a complaint with the state attorney general.
- An attorney will give you the best debt settlement advice.
What are the key debt settlement laws you should be aware of?
When you're looking for debt negotiation services, you should become familiar with the relevant laws to avoid getting scammed. The Telemarketing Sales Rule was introduced in 2010 to safeguard the interests of consumers and prevent debt settlement companies from using fraudulent activities. Here are a few important laws that everyone should know:
- Upfront fees: Debt settlement companies are not allowed to charge you an upfront fee. They can charge you a fee only after they have settled the debt. To do that, they must submit the complete settlement program to you and also give you proof that the initial payment was made to the creditor.
- Disclosure: The debt settlement company is required to explain the entire program upfront. They need to inform you when you can expect the debt resolution process to be complete. In addition, they are required to disclose the following facts to you:
- The total cost of maintaining the dedicated account and the program.
- The effect the debt resolution activity is likely to have on your credit score.
- Misrepresentation: The Federal Trade Commission prohibits the misrepresentation of facts regarding debt settlement services. Debt settlement companies and their representatives may not make false promises and must clearly explain the services they offer. They are required to reveal their success rate correctly.
- Dedicated account: According to debt settlement laws, a settlement company needs to meet the following conditions when setting up the dedicated account:
- They must open an FDIC-insured bank account dedicated to the use of your funds.
- They must provide you with complete ownership of the account.
- You must be able to withdraw money from the account anytime without paying a penalty.
- They can't have a referral fee agreement with the bank maintaining the dedicated account.
How can you choose the best debt settlement company?
- Ask the company how they go about settling debt. A good one will know how it works in detail.
- Ask if they charge an upfront fee. Debt settlement companies aren't allowed to charge upfront fees.
- Check if the company is licensed in your state.
- Find out the company's experience in the industry. The longer it has been in the industry, the better.
- Check the fee structure and find out if it is acceptable.
- Go through the company's reviews on the Better Business Bureau's website.
- Check to see if the debt settlement company follows the FTCs regulations.
What should you do before you settle debt with a debt collector?
Settling with debt collectors is not an easy task. You have to be smart, determined, and knowledgeable to deal with them effectively. Specifically, that means you have to:
- Understand the Fair Debt Collections Practices Act (FDCPA) first. This is a consumer protection amendment to the Consumer Credit Protection Act.
- Check if the statute of limitations has expired. Collection agencies can't sue you for the debts after a certain period, depending on your state and the kind of debt you owe. If the statute of limitations has expired, you may not need to pay them a dime.
- Ask the debt collection agency to send you a debt validation letter via certified mail. The letter will lay out the terms of the loan, how much you owe, and the basis of their claim to the debt. It is possible that they don't legally own the debt they're asking you to pay. If this is the case, you don't have an obligation to pay them at all.
How much will debt collectors settle for?
The best debt settlement program can help you save a huge amount of money. It can help you save big on the outstanding balance, penalties, and late fees of your debt. If your accounts are more than 180 days past due, collection agencies may agree to cut down the outstanding balance by a big percentage since they are not getting money, anyway.Back To Index
What are the debt settlement options?
You can settle the debt by negotiating with your creditors on your own, saving a significant amount, and getting rid of debts by paying a lump sum to your creditors. This is referred to as a DIY debt settlement option. Or, as mentioned, you can settle debt with the help of a good debt settlement company.
But which one is a better option?
DIY debt settlement
Debt settlement company
|Negotiation||You have to do it on your own||Attorneys with legal expertise and good negotiation skills will do on your behalf|
As per the industry standard
Related resources where you can get debt settlement help and adviceBack To Index
I'm thankful to Oakview law group for making me debt-free. Thank you so much for guiding me through the process.See More ...