Debt Settlement West Virginia - Know how to get debt free!

Regarding debt, there is no shortage of challenges West Virginia residents face. Although the average figure compared to the other states in America is less, attaining financial stability is still a struggle for them.

As a general rule, the total spending amount of consumers should never exceed their total earnings. However, sometimes under various circumstances like significant life events, uncertainties, or poor spending habits, this financial rule is overlooked.

Various debt relief programs are available for West Virginia residents to ease their debts. They can review options like debt consolidation, debt management plans, debt settlement, etc. The debt relief programs can help to manage debts and make payments more manageable. However, debt settlement can help to elevate a portion of debts.

How does debt settlement in West Virginia work?

Like any other state in America, debt settlement in West Virginia works by a debt settlement company negotiating with lenders or creditors to accept a lump sum payment against the debt instead of the total amount.

In general, debt settlement companies contact creditors on behalf of the consumers to negotiate a more favorable repayment plan or settle the debt. The settlement companies charge a fee, usually a percentage of the amount saved on the debt.

However, it is necessary to note that debt settlement is only helpful if there are a lot of late or skipped payments and possibly collections accounts. A creditor or collector will not accept any less from a consumer if there is reason to believe that the consumer can pay the total agreed-upon amount.

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Is it good to settle your debts or pay them in full?

In general, consumers should pay their debts in full and on time. However, there can be times when paying back debts can become too demanding for consumers. The result may be accumulated interests which leads to an increased total amount to pay or filing for bankruptcy.

In such dire situations, reaching out for debt relief options like debt settlement is more advisable than avoiding them. Although debt settlement can negatively impact consumers' credit scores, the damage is far lesser than not paying the account. Also, it is a better option than collection harassment or filing for bankruptcy.

The impact of debt settlement reflects on the credit report for seven years, but in the case of bankruptcy, the negative implications last for ten years on the credit report.

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What types of debts can be settled in West Virginia?

In West Virginia, the debt settlement program works best with most unsecured debts, like credit card debts, personal loans, medical bills, etc. For instance, a credit card debt settlement or a payday loan settlement can help eliminate credit card debts or payday loan debts.

Unlike unsecured debts, secured debts are tied with securities or collateral. In the case of secured debts, the creditors have the right to recover the amount owed through collateral. Thus, there are rare chances of secured debts getting settled.

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What are the debt settlement pros and cons in West Virginia?

Pros:

• It will reduce the total amount to an agreed-upon percentage of the debt.
• A cheaper and quicker solution to get rid of debt compared to other debt-relief options like debt consolidation or a debt management plan.
• It can reduce the chances of bankruptcy.
• It can eliminate unwanted calls and notices from creditors or debt collectors.

Cons:

• It can negatively affect the credit scores of consumers.
• A lump-sum amount is needed to make the debt settlement offer and settle the debt.
• Creditors are not obligated to accept debt settlement offers, so all creditors may not agree.
• It is not available for secured debts
• The amount forgiven is considered taxable income.

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How to negotiate a debt settlement on your own

Consumers can approach a debt settlement attorney or a debt settlement lawyer who can study their financial situation, plan out the best possible strategy and initiate a debt settlement offer to the creditors on their behalf.

However, consumers also can attempt to negotiate a debt settlement offer on their own in the following way:

Gather all information about the debt

To negotiate debt settlement offer by themselves, consumers should gather information about all the debts they owe. The report includes a list of all the debts owed, minimum monthly payment, interest rates, payment dates, balance amount, etc.

This information can help understand the total debt amount and which debts can be settled.

Devise a strategy

Once all debt-related information is received, consumers need to determine how much the creditors may agree to settle and how much they can offer to pay the debt. Accordingly, consumers must develop a strategy to gather the amount. Consumers may use their savings or make a concrete budget and collect money from paychecks.

When creating a budget, it should account for every occasional and regular expense and emergency costs.

Make the offer for settlement

After the required amount of money is collected, consumers can make their offer. It is best to adopt the lowballing strategy and slowly work up the way to meet a middle ground with creditors. Also, discussing the settlement amounts in dollars instead of percentages will help avoid confusion.

Consumers can consult a debt settlement attorney or look for debt relief programs like a debt management program, debt consolidation loan, or filing for bankruptcy if their settlement offer is rejected.

Obtain a written agreement and make the payment

The settlement offer agreed upon by the consumer and the creditor should be written down clearly and in detail. After carefully studying the contract, consumers should pay the agreed-upon amount to settle the debt.

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What percentage will a collector settle for?

Generally, when creditors believe that the consumer cannot pay their debts, they agree to settle the account for an agreed-upon amount. The reason for this is that in debt settlement, they can recover some amount if not all. Instead, if the consumer files for bankruptcy, they may not receive anything at all.

Creditors may agree to settle debts for about 20% - 50%. However, most creditors agree to settle debts 40% - 50%.

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What is the Statute of Limitations in West Virginia?

The Statute of Limitations depends majorly on the state and the debt type. In West Virginia, the Statute of Limitation for most unsecured consumer debts like credit cards or medical debt is ten years.

Any time beyond the Statute of Limitations, a creditor or debt collector cannot sue a consumer in court. However, the time bar is applied from the last payment date on the said debt and not from the date the debt is owed. Thus, making any small payment to temporarily get creditors off the back will restart the Statute of Limitations afresh for that account.

Debt settlement works best for unsecured debts that have been left unpaid for quite some time instead of current or recently paid debts.

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How does debt settlement affect credit score?

When creditors accept a debt settlement offer, the account is marked “settled” instead of “paid in full.” It indicates the loss the creditor may have suffered and is an alarm for future lenders. As a result, lenders can be reluctant to approve loans anytime soon.

Debt settlement negatively impacts the credit score of a consumer. The impact generally depends on the credit history of the consumer. The higher the credit score, the more significant the drop will be. A good credit score usually ranges between 670 and 739, whereas 580 to 699 is considered acceptable under a fico credit score.

Usually, the credit score may drop from 60 to 100 points depending on the credit history, which lasts for about seven years. Although debt settlement adversely affects credit scores, future timely payments can help recover the damage.

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Tax consequences of debt settlement in West Virginia

The tax consequences of debt settlement in West Virginia are similar to any other state in America. The amount forgiven in debt settlement is usually considered taxable income by the Internal Revenue System (IRS).

However, consumers may be relieved from paying taxes on the forgiven amount if the IRS believes the consumer to be insolvent. Consumers are considered insolvent when their total liabilities exceed their total assets.

It is helpful if consumers consult a certified public accountant to determine whether or not they qualify for insolvency. In addition, consumers may consult a tax specialist in West Virginia to know more about the tax obligations of their state.

Closing Thoughts

Debt settlement in West Virginia is a helpful tool to get rid of some, if not all, debt obligations quickly. It involves paying a lump-sum amount to a creditor in exchange for settling the account or forgiving a portion of the debt. Debt settlement can adversely damage the credit score of consumers, which may reflect for up to seven years on the credit reports. However, with future timely payments, consumers can recover their credit scores soon.

The consumers can initiate a debt settlement offer in West Virginia or reach out to a debt settlement attorney to seek assistance. However, before proceeding with the debt settlement program, it is best to carefully consider the individual’s financial situation and the pros and cons of debt settlement.

Although creditors are under no obligation to accept a debt settlement offer, they may be willing to do so under certain circumstances. For instance, if they believe consumers cannot pay the total debt amount or could otherwise file for bankruptcy. In such cases, creditors may agree to settle between 20%- 50%.

Debt settlement is far more a cost-effective debt relief program than credit counseling or making minimum monthly payments when the condition is dire. Among other debt settlement alternatives, filing for bankruptcy, a debt management plan, and debt consolidation are a few to mention.

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Disclaimer: This article is for informational purposes only and does not constitute legal advice. Please consult a qualified attorney for advice on your specific situation.