Debt Settlement in Minnesota

You can settle your debts either by directly negotiating with your creditors to reach a settlement, or you can enroll with a debt settlement company accredited by the Better Business Bureau in Minnesota.

How to negotiate with your creditors?

You might find the idea of negotiating with your creditors a little difficult. Indeed it is not very easy, but at the same time it is not impossible. You can follow the steps given below to negotiate with your creditors and reach an amiable settlement of your debt accounts.

Here are the steps to negotiate with your creditors:

1. Know the law: Learn about the Minnesota's debt settlement laws.
2. Contact your creditors: Contact your creditors to inform them that you are willing to settle your accounts.
3. Convince about your financial woes: It is very important to convince your creditors about your financial troubles. Your creditors need to understand that you are financially strapped and might end up filing for bankruptcy. Creditors are well aware of the fact that if you declare bankruptcy, they might lose the entire amount that you owe to them. So, your creditors will become more likely to agree to your settlement proposal.
4. Offer a big settlement amount: Negotiate wisely. Creditors are likely to accept your proposal for settlement if you offer them a big settlement amount. But do not agree on any amount more than 50% of your outstanding amount.
5. Propose a payment plan: If you cannot afford to pay the entire settlement amount in a single payment, then do not hesitate to propose an installment payment plan. With an installment plan you can pay off the amount in affordable installments.
6. Make sure your debts are reported as "settled": Once the settlement process is done, make sure your creditors report your accounts to the credit bureaus as "paid" or "settled" so your credit score increases.

How can Minnesota debt settlement companies help you?

If you do not want to negotiate with your creditors directly, then you can enroll with a debt settlement company in Minnesota to get your debts settled. When you sign up with a settlement company, the company takes up your debt issues and works on them.

The following is the step by step method that the debt settlement company will use in order to settle your debts:

1. First, the company will analyze your debts and your financial situation and then get you enrolled in a suitable program.
2. When you enroll in the settlement program, the company's debt settlement attorney will notify your creditors to cease all communication with you and that your debt issues are being handled by the company.
3. Then the company will create a trust account in your name, where you will be required to save a monthly amount for debt settlement.
4. When sufficient amount is saved in your trust account, the company's debt arbitrator will negotiate with your creditors to fix the settlement amount. Skilled debt arbitrators can reduce your payable amount even up to 60% of the outstanding amount.
5. After the settlement amount is fixed, the company will create a suitable payment plan so you can pay off the settled amount. Settled amounts can either be paid in a single payment or in installments.

Duration of a debt settlement process in Minnesota

The duration of debt settlement process typically depends upon various other factors, such as the type of debt, the number of debts you are settling, the total debt amount you are settling, etc. While a credit card debt settlement takes about 3-9 months, most other debts take about 12-36 months.

How does debt settlement affect credit scores in Minnesota?

The impact of debt settlement on your credit score mainly depends upon your current credit score and the delinquency of your accounts.

If you settle your delinquent accounts, your credit report will show them as "paid off"/ "settled" and that will boost your credit score.

Debt settlement can be also helpful even if you do not have delinquent debts and your credit score is in a good shape. The prime reason that causes a debtor to choose debt settlement is their inability to continue with the monthly payments towards the debts.

When you sign up for settlement with non-delinquent debts, your credit score may lower. But on successful completion of the settlement, your score will rise again. That will put you in a better position than someone who has been defaulting on his payments.

Thus, debt settlement in general, will pave way for a good credit report.

Benefits of Debt Settlement, Minnesota

The following are the benefits that you get from a Minnesota debt settlement program:

• Avoid the hazards of bankruptcy.
• Pay just the qualifying amount, unlike debt consolidation and credit counseling.
• Puts an end to harassing collection calls from creditors and debt collectors.
• Have an improved credit score.
• Save money.

Tax Consequences

Debt settlement is a taxable process. Any amount forgiven in a debt settlement program is regarded as taxable income by the IRS.

On the completion of the settlement process, your creditor should report your forgiven amount to the IRS and send you a 1099C form so you can report the income on your Federal tax return.

If your creditor does not send you the form, you should notify the IRS about the debt amount that was forgiven through debt settlement.

Note: The services of OVLG are currently unavailable in Minnesota.