Before you make the decision to enroll in a debt settlement program, here are some very important things to consider:
The decision to enroll in a Debt Settlement Program should only be made after careful consideration and weighing all of you options.
First, some VERY IMPORTANT POINTS...
Not everyone should enroll in a debt management program!
Debt Settlement is not an "easy" way to get out of paying the debts you owe!
Not all Debt Settlement companies are alike or legitimate, so be very careful in deciding!
You cannot just forget about your debts and the program!
A Debt Settlement Program may take a few years to complete. It is not a "quick fix"!
NOT EVERYONE SHOULD ENROLL IN A DEBT SETTLEMENT PROGRAM
I began helping people with debt problems almost 15 years ago, so I understand and appreciate it when someone calls seeking help.
Most of our clients (I'd say 95% or so) needed help after something very traumatic and/or financially devestating happened to them.
It could have been one or a combination of the following:
- Unemployment, downsizing, or a significant reduction in income
- Death of a spouse of partner that cut income dramatically
- Sickness or disability not only limiting income, but requiring payment for medications and treatment
- Too little fixed income after retirement
- Divorce
When a catastrophic event happens, it usually does not give us much, if any, warning.
You have a mortgage, or rent, car payment, normal bills, a few credit card accounts that you are making all of your required payments on each month with maybe even a little left over.
Then, you lose a large portion of income and all of a sudden, there just isn't enough income to keep up with all of your obligations.
At first, you're concerned, but not too worried as you expect things to turn around in a short period of time.
But after a few months, the small savings you had (if any) is gone and you actually had to do a cash advance in order to meet your obligations.
Your credit cards begin to get maxed out and soon, you just simply cannot keep up.
What can you do?
You really only have a few choices:
- If you qualify, a Debt Management Program (formally referred to as Credit Counseling).
- Debt Settlement
- Bankruptcy
In a Debt Management or Credit Counseling Program, usually your interest rates ared reduced, late or over-the-limit fees are stopped (and sometimes forgiven), you have one monthly payment to a company that distributes it to each of your creditors as per the agreement.
The calls and letters stop and usually, you debts are paid off in around 48 months.
THE PROBLEM IS....
The minimum total monthly payment is usually as much or MORE than you are currently unable to meet!
Now what?
If you cannot qualify for the Debt Management Program, then the Debt Settlement Program may be just what you need to avoid the 3rd, and in my opinion, the final option after all other options are examined, Bankruptcy.
Previously, I stated that a Debt Settlement Program IS NOT for everyone.
I believe that if you have taken out debt, then you should, if at all possible, repay the debt per the agreement.
Debt Settlement SHOULD NOT be a "get-out-of-debt-free" card!
By the way, a professional, qualified Debt Settlement Company will take the time to go over you particular situation and outline all of your options so that you can make an informed decision.
Be VERY SUSPECIOUS of any company that tries to "sign you up" very quickly without reviewing all of your options!
Once you are enrolled in a Debt Settlement Program, here is basically what will happen:
Most likely, you have missed or stopped payments to your creditors. These creditors are going to send letters and will call you seeking payment.
While your account is still with the original creditor (it has not been charged off yet), that creditor has the legal right to call you concerning the debt.
However, they must comply with the Fair Debt Collection Practices Act that protects consumers from harassment int he debt collection process.
Once your accounts are 120-180 days late, they most likely will be "charged off" and assigned or sold to a Debt Collector.
A Debt Collection Company will take accounts on consignment or buy debt in order to get some kind of payment from the consumer.
Once that account has been placed with the Debt Collection Company, they will send letters and start to call, and call, and call!
The good news is that now, you can PUT A STOP TO THESE CALLS!
Just use the Free Sample Letter above, follow directions, and the call should stop very soon. If not, your Debt Settlement Company will help put a stop to them!
The agent who enrolled you into the Debt Settlement Program has gone over your budget to determine an amount that works with your situation that you can contribute to your Settlement Fund each month.
It will be much less than the total monthly amount you were required to pay before!
While this fund is growing, a negotiator from the debt settlement company will contact the debt collector to start negotiating a settlement.
Depending on a number of factors, usually a settlement around 50% of the current balance will be negotiated.
After a written SETTLEMENT AGREEMENT is received, a the payment will be made.
In many cases, the final settlement agreement can be paid out in monthly payments (0% interest) from you settlement account over several months.
Again, it all depends on your particular situation. Your negotiator will most likely discuss the situation with you.
Once the settlement is completed, the debt collector should contact all 3 major credit reporting bureaus that this account has a $0 balance and has been paid-as-agreed.
Over time, the process of settlement will IMPROVE YOUR CREDIT SCORE as your balances are going down. But, it will not happen over night!
WHAT IF YOU CANNOT EVEN AFFORD A DEBT SETTLEMENT PROGRAM?
There are times that even after enrolling in a debt settlement program your financial situation worsens and you simply cannot afford to continue.
In that case, BANKRUPTCY may be not only your only options, but your BEST OPTION.
I believe that bankruptcy should be a person's "last resort".
In fact, the bankruptcy laws have changed over time to make it very difficult for someone just to walk away from their financial obligations through bankruptcy!
You should consult an attorney who specializes in Bankruptcy!
The attorney will meet with you (no charge for the initial meeting) and go over you situation and your options.
FINALLY....
While a Debt Settlement Program is not for everyone, in many cases, it will allow you to:
- Avoid Garnishments
- Reduce you monthly outgo
- Avoid bankruptcy
Need help making your decision?
Let us help...
