10 Questions to Ask yourself Before Considering Debt Settlement
It is not a secret that Americans are struggling financially. Extensive layoffs, inflation, unsustainable health care, rising fuel prices and high interest rates on credit card accounts are plunging millions of consumers to the brink of bankruptcy.
However, many potential bankruptcies are turning to a less radical solution to their debt problems: debt settlement.
The settlement of debts is not new. It is simply an agreement between two parties to settle the debt less than the outstanding balance.
Lenders have been doing this for hundreds of years, but the modern American banking industry has begun to formalize the practice after many of its clients began to fall behind in the late 1980s and early 1990s.
These banks established separate departments with specially trained negotiators who contacted late clients and provided them with a lower salary amount to settle the overdue account in its entirety.
Soon after, entrepreneurs created debt relief companies to negotiate the best possible conditions for consumers with financial difficulties to try to pay off their debts.
This marked the birth of a modern debt settlement company. Thousands and thousands of consumers flock to debt settlement sites to look for more information, sign up for a debt settlement program and become increasingly popular as an alternative to bankruptcy.
There is a good reason for the liquidation of popular debts. For some, it may be the fastest and cheapest way of debt relief in addition to bankruptcy.
According to most debt settlement sites and information sites, consumers may be able to settle all debts eligible for settlement less than the total outstanding balance in less than three years.
Is the debt settlement right for you?
If you are struggling with your money and looking for a barrel in bankruptcy, you should investigate the debt settlement. However, debt settlement is not for everyone.
Therefore, you should try to fully understand how it works, as well as the benefits and disadvantages of this debt resolution option before enrolling in a debt settlement program or trying to negotiate your own agreements.
Here are some questions that should be asked to help you understand this.
1. Can I pay my debt?
If you can pay all your debts in full, you must do so. The settlement of debts is only for people who can not pay their debts financially in full, but who can pay the debts if the outstanding balances are reduced.
2. Do I have financial difficulties?
Not wanting to pay off your debts is not a good reason to enter into debt negotiations, and creditors often take into account financial difficulties during negotiations.
These difficulties can include unemployment, loss of income, unexpected medical bills, illness or death in the family and divorce.
3. What type of debt should I liquidate?
Debt settlement only works on unsecured debts, such as credit card accounts, medical debts and perhaps some store cards and other personal debts.
Historically, lenders do not negotiate or settle secured debts, such as mortgage loans, car loans, student loans and other secured loans.
4. Can I save and allocate some money every month?
Although you can not pay your debts in full, you must be able to pay at least some of your debts, if you can save some money and allocate it each month.
This amount must be less than the minimum monthly payments required from your creditors (if you can pay your minimum monthly payments, the debt settlement may not be appropriate for you).
However, even saving and keeping this amount smaller each month will add a sum that you could offer as a reduced bonus for debt settlement. It can take months, but if it is coherent and cooperative, the money will accumulate.
5. Can you work with a budget?
Your ability to save money and allocate it to pay your fees will require you to work within a limited budget.
If you do not have financial discipline, start learning to be. Looking for a debt settlement is an honorable way to solve a difficult financial situation, but it requires discipline, that is, a budget.
6. How much do I care about the credit?
Debt settlement can be devastating to your credit. This is because the process leads to the loss of payments and the accounts are often deducted before liquidation.
If you get your credit score more than being debt free, you should think about getting a second or third job to be able to settle your debts and skip the debt settlement option (assuming you can keep this for several years until all the debts are paid).
Otherwise, be aware that negative marks may remain on your credit report for up to seven years (except for bankruptcy, which may remain on your credit report for up to ten years). However, as the negative mark progresses, its effect will be lower on your credit score.
7. Do I want to avoid bankruptcy?
A debt settlement program is really about helping you pay off your debts based on your limited financial capacity and keeping you away from bankruptcy, assuming you want to avoid bankruptcy.
This is important, because some people do not care about the ten-year stamp on their balance or the fact that they can not file Chapter 7 bankruptcy again for another eight years. Some people may not have a home they are trying to save or they do not have to deal with the new bankruptcy law designed to prevent some people from going bankrupt.
However, if the idea of bankruptcy is not good for you and you are struggling to get it, debt settlement may be just what you need.
8. Can I emotionally separate myself from my debt?
If you are looking for a debt settlement, your creditors will not be satisfied with you because they want you to pay all your debts in addition to the interest, plus the fees, plus any other rate you can dream of.
You may end up receiving calls from debt collectors and some debt collectors can be downright nasty. They often use guilt to force the consumer to pay off the debt, even if the investors do not have debt or if the consumer does not have the ability to pay.
Therefore, consumers seeking debt settlement must emotionally disavow their debts, read the FDCPA and be alert to their goal of being debt free.
9. Can I be patient?
We live in a culture of instant gratification. We hope to prepare our food before putting the blankets in the fountain drinks. Our mail should be there all night and we want pizza in 30 minutes or less.
Debt settlement does not work that way. It is likely that several months will pass before you save and allocate sufficient funds to begin making payments to a creditor and can take weeks or even months of negotiations before the creditor accepts.
If you are looking for debt settlement, you have options. There are many debt settlement companies to choose from, and even law firms that will negotiate the settlement of your debt on your behalf.
However, you should investigate any company that you consider, be it a professional services company or a law firm. These companies will charge you for their services, so be sure to compare the way you charge to ensure you get the best deal.
Also check with the Better Business Bureau to see how each company handles complaints. You should also deal only with companies associated with industrial organizations, such as the Association of Liquidation Companies (TASC) and the USOBA.
Of course, you can always negotiate a debt settlement on your own. All you need is the right information, and there are groups you can buy to guide you through the process.
Just look for a “set of debt settlement tools” or “debt settlement group on your own” and you should find an affordable package that will show you how to pay off your debt without spending hundreds or thousands of dollars in settlement service fees. professional debt
In the end, how to solve your debt problems depends on you. If you owe your eyes and struggle to meet your needs, you must do something. The debt does not accumulate.
It grows with interest and fees, and every dollar you owe is a dollar you do not have to pay for rent, foreclosure, food, education or family leave. For your personal and financial well-being, there is nothing like being debt free.