Everyone experiences debt at one point or another; whether it's owing your friend $5 for the ice cream he or she bought you, or owing the banks $50,000 in un-paid bills. If your debt has reached an amount that you simply cannot pay off, then it is time to seek help. Debt help comes in many different forms: debt consolidation, consumer proposal, bankruptcy, and debt settlement. The latter is the option that we would like to focus on. Debt settlement is an ideal debt relief option, because unlike bankruptcy, it does not have too many negative outcomes. The debt settlement program works by negotiating your debt down with the creditors and collection agencies, consequently enabling you to pay lower monthly payments in a short period of time. Additionally, you will notice a reduction in collection calls.
An efficient debt settlement program will reduce your debt amount by up to 70%, turning your $30,000 debt into $9,000. Due to this reduction, you will be able to make affordable monthly payments and be relieved from your debt within three years! To find out if you can qualify for a debt settlement program, ask yourself the following questions: Are you behind in your payments? Do you have unsecured outstanding debt balances? Can you not repay your bills? Are you considering bankruptcy? If you answered yes to any or all of these questions, then you are probably in the position to consider debt settlement.
The Debt Settlement Process
You are probably wondering how debt settlement works to reduce your debt amount and your monthly payments. Well, allow us to explain. A debt negotiator will work on your behalf to reduce your debt amount by offering a low lump sum payment to your creditors. The lump sum that will eventually be paid to your creditors will come from a secured Federal Deposit Insurance Corporation (FDIC) account from which you will be putting money in every month. During the time that you are making payments toward this account, you will be instructed by the debt negotiators to stop making payments to your creditors. The effectiveness of this process is rooted in the fact that the creditors have lost all hope of you being able to pay off your debt, since you haven't been making payments for months. Because of this lack of hope, the creditors are much more likely to accept a lump sum payment that is smaller than the amount of your debt. For instance, if your debt amount is $30,000, and you haven't made payments in months, the creditors will be likely to accept a lump sum payment of only $9,000.
Consumer Protection during Debt Settlement
If you are worried about putting too much trust into debt settlement companies, then worry no longer. For your protection, the Federal Trade Commission (FTC) has put forth laws, enacted in 2010, that disable debt settlement companies from charging your any fees until after your debt is settled. This is very beneficial on the part of the consumer, because there is essential no risk. If you feel the need to cancel the program half way through, you will lose no money, since you will have complete access to you FDIC account. The debt settlement company, in fact, is forbidden from taking any money from your FDIC account until your debt is settled and you see proven results. Due to the FTC laws, you can be sure to be 100% protected from any fraud that you may be worried about from the debt settlement companies.
Pros & Cons of Debt Settlement
1. Settle your credit card debt, store card debt, utility bill debt, payday loans, personal loans, rent defaults, and any other unsecured lines of credit
2. Get a debt amount reduction up to 70%
3. No extra fees until after the debt is settled
4. Get relief from creditor calls and harassment
5. Avoid legal troubles
1. Cannot settle secured debt, like mortgages
2. Because you will be instructed to discontinue payments on your debt, your credit score will suffer
3. You may have tax implications for the debt that you still owe after settlement
Is Debt Settlement for you?
After learning all there is to know about debt settlement, you are probably left with one question: is debt settlement the right program for me? Well, let's find out. Have you defaulted on a loan? Are you continuously missing payments? Do you have a source of income? Are you facing a financial hardship? Is your debt amount over $10,000? If you answered yes to any of these questions, then you will most likely qualify for debt settlement. To find out which debt settlement company will work best for you, and for some helpful tips about how to go about debt settlement, contact one of our debt and credit experts.