Debt Settlement in Louisiana
If you have been defaulting on your payments for quite some time, your outstanding debt amount is growing with accrued penalties and interest, and you are getting repeated collection calls a Louisiana debt settlement program might be the answer you are looking for.
How does Louisiana debt settlement work?
Debt settlement is a debt reduction program where your creditor accepts a lower amount from you, considered payment in full of your obligation towards your creditor.
It is a legally safe solution for consumers who cannot afford to make payment in full of their obligations and desperately want to avoid bankruptcy.
You can settle your debts in either of the following ways:
- You can negotiate with your creditors, or,
- You can enroll in a reputable debt settlement company, accredited by the Better Business Bureau in Louisiana
How to negotiate with your creditors?
If you want to avoid all the added costs of hiring professional help to settle your debts, then the best option is to negotiate with your creditors directly.
Now, if you think you are not sure about how to settle your debts on your own, then here are some guidelines on how to negotiate with your creditors:
- Learn about the law: The first thing you should do is learn about Louisiana's debt settlement laws, before you set out to negotiate with your creditors.
- Contact your creditors: You should inform your creditors that you are willing to settle your accounts.
- State why you need debt settlement: It is very important to let your creditors know that you are experiencing financial hardship and you cannot pay the debt in full. You can emphasize your plight by stating that if your proposal in denied, then you might have to file for bankruptcy. Creditors are well aware that if you declare bankruptcy, they might lose the entire amount that you owe them. So, your creditors are more likely to agree to your proposal for settlement.
- Offer a lump-sum: If you offer a large settlement amount, your creditors are likely to accept your settlement proposal. But do not agree on any amount more than 50% of your outstanding debt.
- Propose a payment plan: You can propose an installment payment plan if you cannot afford to pay the full settlement amount in a single payment. A payment plan can help you pay off the settled amount in affordable installments suited to your budget.
- Make sure your debts are reported as "settled": After the settlement, make sure your creditors report your accounts to the credit bureaus as "paid" or "settled" so your credit score bounces back.
How can a Louisiana debt settlement company help you?
If you feel you cannot manage you debt issues on your own, then you can sign up with a reputable debt settlement company in Louisiana to settle your debts. Ensure that the company you are signing up with is accredited by the Better Business Bureau in order to avoid a scam.
When you enroll with a debt settlement company, the company will work on your debt issues in the following manner:
- First, the company will evaluate your debts and finances in order to get you enrolled in the right program.
- When you enroll in a settlement program, the company's debt settlement attorney will send a "cease and desist" and power of attorney letter to notify your creditors to stop all communication with you and that your debt issues are being handled by the company.
- Then the company will create a trust account in your name, where you will be required to deposit a certain amount every month for a lump sum debt settlement.
- When enough gets saved in your account, the company's debt arbitrator will negotiate with your creditors to determine the actual settlement amount. Skilled debt arbitrators can settle your account for about 40% of the outstanding amount.
- Once the settlement amount is determined, the company will devise a suitable payment plan to suit your monthly budget. Settled amounts can either be paid with a single payment or in installments.
Duration of the debt settlement process in Louisiana
While credit card debt settlements take about 3-9 months, most other debts in Louisiana take about 1-3 years. The duration of a debt settlement process also depends upon various other factors, such as the number of debts you are settling, the kind of debt, the total debt amount you are settling, etc.
How does Louisiana debt settlement affect your credit score?
The effect of debt settlement on your credit score depends upon:
- The delinquency of your accounts.
- Your current credit score.
If you settle your delinquent accounts, your credit report will show them as "paid off"/ "settled" and that will increase your credit score.
Even if you do not have delinquent debts and your credit score is good, debt settlement can be helpful. What primarily causes a debtor to choose debt settlement is their inability to continue with the monthly payments towards their obligations. So, with debt settlement you can get rid of your obligations faster.
When you sign up to settle non-delinquent debts your accounts become delinquent and your credit score may decrease. But on successful completion of the settlement, your score shoots up again and puts you in a better position than someone who has been defaulting on their payments. Thus, debt settlement typically makes way to a good credit report.
Benefits of Louisiana Debt Settlement
A Louisiana debt settlement program helps you with the following benefits:
- You avoid the hazards of bankruptcy.
- You pay just the qualifying amount, unlike debt consolidation, and credit counseling.
- Harassing collection calls from creditors and debt collectors are stopped.
- You can improve your credit score.
- You can save money.
Debt settlement is taxable. The IRS considers any amount forgiven in a debt settlement program to be taxable income.
On completion of the settlement program, your creditor should report your forgiven amount to the IRS and send you a 1099C form so you can report the forgiven amount on your Federal tax return.
If your creditor does not send you the form, you should notify the IRS about the amount that was forgiven through debt settlement.