If you are struggling with overpowering debts, you must be losing your sleep over it and wondering what would be the best way of getting rid of the debts. There are many effective debt management techniques including consumer credit counseling, debt consolidation loan, filing for bankruptcy, and debt settlement. You must choose an appropriate technique depending on your unique requirements. In the case, you are thinking of opting for debt settlement, you must understand the implications clearly before opting for it. You must understand the process clearly before choosing it. Let us explore some of the common questions relating to the debt settlement process.
What Are Some Important Statistics Associated with Debt Settlement in the U.S.A.?
“A detailed statistical review commissioned by the American Fair Credit Council (AFCC) revealed that there were 400,000 clients in 2.9 million accounts enrolled in debt settlement programs during the period January 1, 2011, to March 31, 2017”, has appeared on https://americanfaircreditcouncil.org/wp-content/uploads/Regan-Report-Short-Version-FINAL-AFCC-Brand.pdf.
What Do You Understand By Debt Settlement?
Debt settlement is often referred to as debt arbitration or debt negotiation. It is an effective debt management technique wherein your lenders would be accepting less money as compared to what you owe and would be ready to consider the debt as settled or paid in full.
How Does a Debt Settlement Program Actually Work?
When you hire a debt settlement company, they would be creating a special account for depositing money. You are required to make fixed payments toward that account every month. You may stop paying the creditors’ once the debt settlement company is handling the case on your behalf and your monthly payment is getting deposited in a trust account. You may use a secure login for effectively managing your trust account. Once you have been successful in depositing adequate funds into your trust account, your debt settlement company would initiate negotiations actively with all your creditors.
These negotiations would take place between the debt negotiation specialists with collection agencies and your creditors. They would be working consciously toward settling your debts for a specific amount that is acceptable to both your creditors and you. Once the debt negotiators are successful in negotiating a debt settlement amount with your specific creditors, it is your responsibility to make an immediate lump sum payment or in installments. It is the intention of debt negotiators to substantially reduce the amount of actual outstanding balance.
What Are the Occasions When Debt Settlement Should Work Best for You?
There are certain situations when debt settlement would really make sense. Some of the situations are:
- You are unable to pay your bills.
- You may afford to repay a reduced debt amount.
- You are having unsecured debts.
- You are planning to declare or file for bankruptcy.
- You have been defaulting and are around six months behind on your repayments.
Do You Think That Debt Settlement Is A Legitimate Method?
Yes, debt settlement is very much legal. There is nothing that could be called illegal about the debt settlement process. Realistically speaking, it is one of the frequently used and popular debt management options. However, you must avoid scammers. Examine the credentials of your debt settlement company meticulously. Avoid dealing with unscrupulous companies who are interested only in making money from distressed people who are grappling with debt. Many debt settlement companies have been forced to close down as they had failed to fulfill the legalities and comply effectively with both federal and state laws. Consumers must browse the Internet for debt settlement feedback so that you are sure of the authenticity of a debt settlement company and you could avoid and stay away from fraudulent services.
Why Do You Think Lenders Are Happy to Settle?
In the event a lender has accepted a borrower’s debt settlement offer, he is willingly forgiving or giving up a portion of your debts. This implies it would be losing some money on the deal. In such a case, why would a lender be willing to settle your account? That is simply because lenders are smart individuals with foresight and experience. They fully appreciate the fact that since your finance is in doldrums, you may opt for filing bankruptcy. In such a situation, they would get nothing out of the situation. In the event of a debt settlement at least, they could recover a significant portion of the money you still owe. Hence, debt settlement becomes a much better deal for your creditors as well.
What Are the Top Advantages of Debt Settlement?
The greatest advantage of debt settlement would be the fact that your debts would ultimately be reduced and you would not have to respond to harassing calls and letters from debt collectors. Moreover, you could steer clear from the risks associated with bankruptcy. For instance, had you opted for chapter7 bankruptcy, there would be a drastic 180 points to 200 points dip in your credit score. Moreover, it would become really difficult to acquire credit for the next couple of years or so and also, bankruptcy would be present in your credit file for the next 10 years or so.
How Much Time Would Debt Settlement Take?
The actual time taken for settling debts would be depending on the volume of debts, the kind of debts, and the precise amount of money required for settling your accounts. Generally speaking, debt settlement companies would be taking about two years or so for settling the debts.
Are You Eligible for Debt Settlement?
Remember debt settlement is not meant for everybody. It may be beneficial but everyone will not be eligible. It is quite possible that your creditors would be agreeing to opt for debt settlement in case you have actually defaulted and are missing payments consistently; your creditors would agree to settle all your existing debts.
You must understand clearly every aspect of your contract. Your contract relating to a debt settlement firm must be easy to understand. Only thing is that you must inculcate is a degree of patience and restraint. You must hire professionals for understanding complex legal documents.