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Debt Settlement in Oregon - Know What, Why, and How to settle debt!

People usually get into debt under two circumstances- to support certain expensive events, for instance, moving to a new house, having children, getting a new car, education, medical expenses, etc., or poor financial management. Either way, debt is a dangerous cycle that can disrupt your life and affect you significantly, especially when you fail to make timely payments.

According to recent data, the median household income in Oregon is $76,554 as of 2020. And the average credit card debt in Oregano is $4,681 as of 2021.

While there are several debt relief programs to help you manage your debt effectively, debt settlement plans can be helpful to get rid of debts quickly.

How does a debt settlement program work?

A debt settlement program, or a debt settlement plan, works by negotiating with your creditors to accept a lump sum payment against the payoff amount. This process involves you or a debt settlement company negotiating with your creditors on your behalf. A lump-sum amount, which is less than the actual amount you owe, is offered to be paid and mutually agreed upon to close the accounts.

Suppose you are comfortable and confident in your negotiation skills. In that case, you can choose to settle your debt on your own, or you can consider approaching a debt settlement company in Oregon that can settle the debt on your behalf.

However, you must be sure to choose a legitimate debt settlement company. One of the several ways to ensure this is by confirming that the company is accredited by the Better Business Bureau (BBB).

What kind of debt can be settled?

Debt settlement usually works best with unsecured debts, including credit card debts, personal loans, medical bills, etc. It rarely works with secured debts; in this case, the creditors are entitled to recover the due amount through collateral.

When should you decide to settle your debt?

Settling your debts can be an ideal option for you when you have most debts unsecured, are struggling to manage your payments, and are already behind due dates by at least 90 days. You can decide to make an offer to your creditors to settle the debts when you have enough funds ready, at least 60% of the amount due, to make the payment.

Creditors usually agree to accept settlement offers when they see missed payments piling up and sense a possibility that the debtor could be filing for bankruptcy in the future. In such a situation, receiving partial payments is still better than not receiving any payments at all.

Although you must not stop making payments intentionally to pave the way for debt settlement, as this can affect your credit score when reported against late payments or non-payments.

How does a debt settlement company in Oregon help to settle a debt?

Firstly and most importantly, you must ensure that the debt settlement company you are approaching is legit.

Once you contact a legit debt settlement company in Oregon, they may ask you to provide information on your financial situation. After reviewing your financial condition, they will draw up a plan that can work the best to help youget out of debt quickly.

You might be required to accumulate or save funds toward the lump-sum settlement amount. This may also include the settlement company's fees and debt interests charged by creditors if any. Based on your financial ability, it may take about 24 months. The shorter this period, the faster you can get rid of the debt. Hence, it is best to go over your budget.

Ideally, most debt settlement companies charge a fee of 15-25%, which might be a percentage of the total debt you owe or a portion of the agreed-upon payment amount.

How to choose a debt settlement company in Oregon

Once you have decided on settling your debts, you will want to approach a legit debt settlement firm. According to Oregon state law, a legitimate debt relief company must be registered and follow industry standards designed to protect debtors and their money. Here are some ways to ensure that a debt settlement company is legitimate or not.

Check for Better Business Bureau (BBB) or the American Fair Credit Council accreditations.This confirms that the company is legit and trustworthy. Also, it maintains high standards and practices.

Second, after accreditation, you need to check how many years the company has been providing services. This can help you understand if the company is experienced enough in negotiating with your creditors, and an experienced company can mean a more substantial possibility of successful negotiating.

Debt settlement companies in Oregon are not permitted to charge fees in advance. When choosing a debt settlement company, it is essential that you clearly understand the prices it may charge for the services and how much it may cost in the long run.

Lastly, you must check for the company's customer satisfaction records to help you get a general idea about the company's services. Besides ratings, you must also read the reviews by the customers to understand what customers feel about the company, where their services excel, and what their shortcomings are.

How long does it take to settle debts in Oregon?

The duration of settling your debt in Oregon depends on your financial situation and your ability to pay. In most cases, the entire process may take two to four years.

What is the statute of limitations on debt in Oregon?

There is a particular time frame within which your debt collector or creditor can sue you for collecting the debts you owe to them, known as the statute of limitations.

In Oregon, the statute of limitations is six years for collecting unsecured debts, after which the debt becomes time-barred. That means the creditors are not legally allowed to sue you in court.

One important point to remember here is that the statute of limitation is not applicable from when you owed the debt but from the date of your last payment. Accordingly, if you make payments in haste to remove the collections calls temporarily, this would mean restarting the statute of limitations.

What are the pros and cons of debt settlement in Oregon?

Pros of settling your debts in Oregon:

  • Your overall debt balance is reduced
  • It is comparatively cheaper and quicker to settle than other debt relief programs like debt consolidation
  • You can get rid of unwanted calls and notices
  • You may avoid the chances of bankruptcy

Cons of settling your debts in Oregon:

  • Your credit score may drop
  • You may need to make a lump-sum payment
  • Available only for unsecured debt
  • You need to pay tax on the amount forgiven
  • Creditors may not always agree to settle

How does debt settlement affect your credit score?

Like many other states, debt settlement in Oregon usually negatively impacts your credit score, even though it means you have managed to come out of debt. A reason for this is that it indicates that your creditors have agreed to accept a payment that is less than you owed.

Your credit score could fall between 60-100 depending on your credit score history, and it could show in your credit records for up to seven years, according to the Fair Credit Reporting Act (FCRA) regulations.

Although it affects your credit score adversely, it is only for the time being. That means, if you begin to make timely payments henceforth on your accounts, you can gradually improve your credit score.

Tax consequences

Debt settlement in Oregon may have subsequent tax consequences. If $600 or more is forgiven with the help of a debt settlement program, the Internal Revenue Service (IRS) will consider this discounted amount as taxable income.

However, it is best if Oregon residents consult a tax specialist in their state to know more about their state taxing regulations.

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