Debt Consolidation Blog » Debt Settlement

Difference Between Credit Counseling and Debt Settlement

Debt Planner — Tue, 20 Jul 2010 15:01:17 +0000

It is very easy for consumers to get into debt but feel very hard to get out of debt. Consumers feel difficult as they do not realize that they have many options when planning to become debt free. Credit counseling and debt settlement are two options that most of the debtors choose to get out of debt.

Both options have their own pros and cons. Many a time consumer get confused about which option is right for them. Therefore I decided to discuss about both options below to provide you with required information to make an informed decision and successfully get out of debt.

Debt settlement is also called as debt negotiation, which can be performed either by an attorney or debt settlement company. Even you can also take care of the process but it requires certain skills such as negotiation skills, experience in performing such tasks etc.

There are two ways to work out debt settlement process. Before approaching the debt settlement company or attorney, it is important to find out if you have funds available for the debt settlement company working for you with your lender can use during their negotiation process or the consumer must be able to deposit funds into the account reserved by the attorney or debt settlement company every month that can be used by the negotiator in its negotiation.

The benefit of debt settlement is that you can stop making monthly payments to creditors with whom, you want to settle the debt and use those funds to save, and use them during the process of negotiation. To start convincing the lenders for debt settlement, the debt settlement company require you to save at least 50 to 60 percent of the debt you owe. The debt settlement company will start negotiating with lender once the funds are in your checking account. If you have no funds in your savings account, the debt settlement company will start the procedure of debt settlement only after you have certain amount of funds your settlement account.

Credit counseling is also called as debt management. The concept behind the credit counselling services is to save the consumers time and money by combining all your unsecured monthly debt that allows you to make single payment monthly to the debt management company that is providing services.

The main difference between the credit counseling and debt consolidation and debt settlement companies is that, the credit counselling service providers do not consolidate your debt instead take on single payment from you and distribute to different creditors every month. It means, they take your headache of debt management.

The credit counselling service providers will also help you in reducing the debt by negotiating with creditors to lower interest rates and other terms that help you reducing the monthly payments.

Thus depending on your situation and the kind of action you want to take in an effort to clear the debt, have to choose between the debt settlement and credit counseling services.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice

Settling Your Debt: Five Steps to Negotiating Your Unsecured Debts On Your Own

Debt Planner — Tue, 15 Jun 2010 00:28:39 +0000

What is debt settlement / negotiation?
Debt settlement / negotiation is the process of negotiating with your creditor(s) to accept a partial balance of the total money you owe on your unsecured debts.

When is debt settlement the right choice?
Debt settlement is an option for someone who is more than 90 days delinquent (behind) with their payments and cannot afford to make their minimum payments on their own or through a Debt Management Program. Most creditors will sell off the debt to collection agencies (“charge off”) after 180 days for pennies on the dollar and write the debts off as losses for tax purposes. Credit card companies typically do not negotiate debt settlement when the debtor is current. Why would they? If you have been paying as agreed, in their eyes, you can afford the payments.
Five steps to settling unsecured debts on your own

Step One: Get organized. Write down a list of all of your creditors with the current amount owed on each account, as well as how far behind you are on payments. Order your credit reports to track possible forgotten debt.

Step Two: Start saving money. Set aside money each month and put it into your savings account. Creditors typically only negotiate if you are ready to pay today! So if you don’t have the money to settle, there’s no point starting the negotiations. Keep in mind that most creditors will settle for about 40 to60 percent of the current balance.

Step Three: Start negotiating. Once you have 40 percent of one of your balances saved, start the negotiation process. Start with a low offer – perhaps 30 percent (or less) of the balance. Low-ball offers will probably be rejected immediately, but it doesn’t hurt to ask. Be calm, clear, honest and convincing. Remember, they’re not required to negotiate with you, so crying, yelling or screaming will not motivate them to help you. In fact, it could make it harder on you. Don’t give up easily. If your creditor denies your request, explain to them why settling would be beneficial for them. Their priority is their bottom line and you must make it clear that the offer is in their best interest. If a suitable agreement has not been reached or your offer has been denied, hang up and call back in a week.

Step Four: Keep good records. It is very important to make sure you keep records of each interaction. Note the date and the details of every phone call. Copy and save any letters you receive or send out. Get the agreement in writing! The biggest mistake one can make is spending time and effort negotiating every little thing and then the company does not do what they agree to. So, once an agreement is reached, get it in writing. Do not pay anything until a written agreement is reached. Sign and date the agreement just as you would a contract. Always send by certified mail.

Step Five: Payment time. First things first… never give them your bank account information, routing numbers, checking numbers, debit card numbers, etc. Pay only with money order or cashier’s check and send by certified mail. Again, only once you have received your agreement in writing!
Understand your rights The more informed you are, the better you and your money will be protected. Contact the Federal Trade Commission, the National Consumer Law Center or your state’s attorney general for free information on what both debt collectors and debt settlement companies, if you choose to use one, can and can’t do in your area and situation. You can also review the Fair Debt Collection Practices Act.

How does a settlement affect a credit rating?
This depends on one’s individual situation or current credit rating. Debt settlement can have a negative impact on your credit in different ways. First is the reporting of late payments. In most cases, a creditor will not agree to settle an account for less than what is owed until they believe they are at risk of not receiving any of the balance. The most obvious indication of that risk is when you begin to miss payments. Missed payments are reported in increments of 30 days to as far as 180. Each 30-day increment further affects your credit score adversely.

The second is the reporting of the account as having been settled. While the account may be closed with no outstanding balance after having been settled, it still reports the fact that the account was settled for less than what was owed. The credit scoring models include this notation in their calculation, lowering your score further. The impact of debt settlement on your credit score is also largely dependent on the current makeup of your credit. Many consumers who move forward with debt settlement have already begun to miss payments, have maxed out many of their credit lines and have seen much of the damage already done. So moving forward with the settlement process would affect someone current with payments more than someone who is already behind with payments and other issues with their credit.

Negotiate your credit rating with the creditor
This is very important as a “paid” collection is as negative to your credit rating as an “unpaid collection.” All your negotiation efforts and cold hard cash will do nothing to rebuild your credit report if you neglect to negotiate your credit rating in the process. If the debt is with a collection agency, ask for it to be removed completely. If they won’t remove the account completely ask for “paid.” It still is a negative mark, because it is a collection account, but it is better than, “settled” or “paid charge-off.”
Beware of the tax man! After you have successfully settled your credit card debts, you and other consumers like you could receive* 1099-C “cancelation of debt” tax notices in the mail. Why? The U.S. Internal Revenue Service considers forgiven or canceled debt as income. Creditors and debt collectors who agree to accept at least $600 less than the original balance are required by law to file 1099-C forms with the IRS and to send debtors notices as well. Taxpayers must report that income on their federal income tax returns. Consumers who receive the 1099-C forms should immediately take them to a tax preparer or tax adviser.
*Source: Internal Revenue Service

Food for thought… Try negotiating at the end of the month. Because debt collectors’ commissions are based on their totals at the end of each month, you may be able to get them to agree to less when it’s close to deadline time.

Disclaimer:
The strategies outlined in this flier may not be suitable for every individual, and are not guaranteed or warranted to produce any particular results. No warranty is made with respect to the accuracy or completeness of the information contained herein, and DebtWave Credit Counseling specifically disclaim any responsibility for any liability, loss or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this flier.

DebtWave Credit Counseling, Inc.

Community Outreach Department
8665 Gibbs Drive #100
San Diego, CA 92123
Phone: (858) 751-2600 option 6
Toll Free: (888) 285-7624 option 6
Fax: (858) 751-2608
education@debtwave.com

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice

Debt Settlement and Debt Negotiation to lower credit card debt payments

Debt Planner — Sun, 07 Feb 2010 20:05:27 +0000

Can debt settlement and debt negotiation help lower credit card debt payments? Tired of trying to get out of credit card debt? Losing more and more money on interest rates, late payment fees and annual fees that add up to the debt? This type of things will make you feel like you are being dragged into debt further irrespective how hard you try to get out of credit card debt. Don’t worry this is the speciality of credit card debt. You can only get into it and have to struggle a lot to get out of it.

Debt settlement is a solution in such cases. It is an option that many credit card debtors are choosing to get out of debt. Debt settlement firms work with debtors negotiating with their creditors to help them achieve reducing the debt burden. In this process debt settlement consult all the creditors with whom the borrower is holding an account with outstanding balance.

In this process the debt settlement firm representative will consult creditors in an effort to reduce the overall debt and help you create a debt management plan according to your financial situation. Although this type of action will hurt your credit ratings, it is much batter option than declaring bankruptcy which affects your credit score very badly.

Many think is it really possible to settle debt with credit card companies? Yes, it is possible. In fact credit card companies are out there in market to make money not to lose money and they won’t make anything if you default on payments. For this reason, credit card companies come forward to settle debt with you.

If you want best results out of debt negotiation, then one must follow these tips which can help you negotiate your outstanding amount successfully.

One can manage to settle debt with creditors when he is successful in taking his hardship to the creditors. This can be done by preparing monthly budget that outlines your financial situation to creditors. With this your creditors estimate your affordability to pay debt every month.

To successfully negotiate, you must have information about your financial affordability before you start contacting your lenders and make an offer. Never ask lenders about how much they are willing to settle the debt, instead you make an offer to the creditor about the amount you can afford to pay in order to mark the credit status as “paid in full”. Never agree for electronic payments from you checking account directly or through post dated checks.

You must show off to your creditors that you are determined to pay off the outstanding balance but unable to meet the payments and tell him that you can afford to pay the debt to figure you offered earlier.

Speak politely with creditors and start negotiating with low balance accounts first. After paying off the settled amount then go for next highest amount and thereafter next highest one and so on.

Make sure to know your rights as a consumer when you are dealing with creditors or collection agencies. By knowing your rights you can protect yourself against the collection harassments and procedures followed by the collection agencies.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.

Is debt settlement the same as bankruptcy?

Debt Planner — Thu, 14 Jan 2010 21:04:30 +0000

Due to downturn in economy, debt has become a part of life but having too much debt can affect the quality of life and make the life miserable. When everything tried out to be useless like debt consolidation and refinancing, the last two alternatives to think about are debt settlement and bankruptcy. This are two potential way to clear the existing debt and start new financial life. But I often hear from many people that is debt settlement same as bankruptcy.

When looking to start the financial life from scratch, it is important to understand the difference between bankruptcy and debt settlement that help alleviate your financial woes.

Bankruptcy is no way related to debt settlement. Bankruptcy is to be considered as a last resort and I advice do not file bankruptcy unless you have no other choice. It will negatively affect your credit score and financial life in future for years to come. Where debt settlement is considered as an alternative to bankruptcy, if you are struggling with out of control.

In general, debt settlement is a process where the service representative will negotiate with lender in an effort to reduce the amount you owe by 50 percent, reduce interest rates, and monthly payments. When you approach a debt settlement service, they ask you to default on payments for at least 3 to 6 month and deposit affordable amount into savings account. After a handsome of amount is deposited into account, debt settlement service representative will start negotiating with one lender at a time and try to reduce your debt balance that range between 20 to 70 percent. If the debt settlement process works out, then you will need a lump sum of amount directly credited to creditor. Remember, no creditor will entertain payment plans with debt settlement process.

Debt settlement is service where the debt settlement service provider will assess your financial position and try to negotiate with your lender to explain your financial hardship to get out of debt. This is an out of court process that involves agreement between creditor and debtor but the debt settlement will not give any kind of relief from debt as the bankruptcy provides instead it provides up to some level of debt relief and that depends on the negotiation skills of the settlement service representative.

On the other hand, bankruptcy is legal procedure where the debtor has to file a case in court or hire an attorney to do the proceeding on behalf of you which will have an adverse affect on credit score.

Bankruptcy will be reported to credit rating agencies and will be in public records for almost 10 years but with debt settlement, period of defaults will be listed on the credit report. This means the affect of debt settlement has less impact then bankruptcy. However, both options adversely impact credit scores, but being is an unfortunate position and have to choose one of the options then I suggest debt settlement for getting out of debt.

Debt settlement or debt management – which is right for you?

Debt Planner — Thu, 14 Jan 2010 18:06:43 +0000

In present economic conditions, most often we hear from many people about debt problems. Due to increase in unemployment rate and cost of living many are unable to meet their living expenses and as a result incurred huge debt. If you’re monthly payments is becoming burden or out of control and getting threatening calls from collection agencies then put a step forward and work a way out of crisis. This can be achieved either by reducing the amount you owe or by restructuring monthly payments that means debt settlement or debt management.

Here is how the debt management and debt settlement works for you:

Debt management is offered by credit counselling agencies when you need more than simple budgeting calculations to pay of your bills. In this process the debt counselling company negotiates with your creditors to restructure your debt like lowering rate of interest, reducing monthly payments in a way affordable to you. However the debt management covers only unsecured debt like credit card debt, payday loans, medical bills, student loans etc.

In debt management process, the debt counselling representative will analyse your financial situation to evaluate your current financial situation like interest rate on your bills, amount you owe in total and minimum payment on each account and negotiate with creditors to lower interest rates and monthly payments. After analysing, they will prepare a suitable repayment plan with your creditors such that you can pay back outstanding amount conveniently. At the same time you can get rid of paying to multiple creditors as you make a single payment to Debt Management Company.

Debt settlement: it is a process where debt settlement company representative will negotiates with your creditors to get your debt reduced mostly around 50 percent of the amount you owe for which those companies charge you an upfront fee. Mostly unsecured debt like credit card debt, medical bills, personal loans, utility bills can be settled but debt like mortgages, car loans, federally insured student loans are not covered in debt settlement program.

Debt management is best choice if you are in any of the below mentioned situations:

Having multiple bills that you are unable to manage them by yourself effectively.
Getting calls from collection agencies and want to stop getting them.
Tried out with self repayment plan and that wasn’t successful in clearing debt.
Want to lower interest rate on the amount you owe.
Want to reduce you monthly payments to the amount affordable according to your present income.
Affected with present economic crisis and want to get rid of bills.

Debt settlement must be a last option before filling bankruptcy as it may affect you credit score with defaults you make to allow the lender settle your debt. It usually takes 2 to 4 years to clear debt under debt settlement program and also depends on the total debt amount.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.

Debt Settlement in Florida

Debt Planner — Tue, 17 Nov 2009 09:51:20 +0000

Due to the financial crisis, many people have nowadays problems in getting out of their debts. There have been specialized credit counseling services, called Family Means, which are helping people find their way out of debt.

Attorney General Swanson says that these services advice people not to pay their mortgage in order to get the attention of credit companies. Actually, the problem is more complicated as the credit companies will come after those who owe them money and finally it will be the person that has lent money suffers the consequences.However if you had run out of all solutions there is still one-way out: bankrupt. Even so, there is still one more problem. The rules of bankrupt have changed in the last decade so it is actually no simple way out.

Debt settlement is the result of the decreasing of the amount of debt lower than the debtor would have actually accepted it. This occurs due to recession. The people who are in extreme debts search a way to get out of this situation as the calls from the credit company increase and it seems that the expenses are higher than the actual income. It is not well known fact that when you have problems completing your payments, creditors would agree to lower debts. It would be a better solution to gain little bit than not be paid at all. Until the creditors accept to modify the conditions of payment, you will have to put money down in order to pay your credits.

Anyway, there are still some solutions shown by media, which explain that you can get out of debt through a settlement and people tend to choose this solution instead of losing their fortunes. You can make it easier with the help of a company that is specialized in dealing with the creditors and that way you can sit down and relax while the non-profit organization will help you get out of your debt. Debt settlement will remain as a dark spot on your credit ratings.

Getting out of debt by a debt settlement process is nowadays popular. Even so, you need to be informed where to locate the most efficient programs in order to get the best results. To compare debt conditions the companies should be wise to visit a free debt relief network, which will indicate the most suitable companies in your area for nothing.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.

Tips To Escape Your Credit Card Debt

Debt Planner — Thu, 15 Oct 2009 18:11:02 +0000

At present the burning question on internet is how to manage the debts or how to manage the credit card debt. The answer to both the questions is simple, yet trivial as it involves a certain level of discipline and personal finance control. In the times of economic doldrums it is really necessary to manage your debts very carefully to avoid the situation of bankruptcy. Credit cards are extremely addictive. Once you start using the credit cards you, start think yourself to be the king or queen on this earth. You not only want to have what you want but what you desire too.

These days it is common that people have four to five credit cards and all are used simultaneously. This leads to nothing except the accumulation of the amount of debt. If you seriously want to go in for credit card debt elimination you need to accept it first that you are in the mess. Here are some of the ways to help you in credit card debt consolidation:

Be strict with yourself: tell yourself repeatedly that you will not use the credit cards from now on. Even in case you need to use it you, will use only one of the all. This will surely get out of this menace easily.
Save every penny: it is advisable to save every single penny possible. Remember, every drop counts. Try and at least pay the minimum dues to avoid any unpleasant situation. The credit card companies take no action against those who pay the minimum amount well in time.
Debt consolidation: it is really important to go in for debt consolidation in case you feel it is practically impossible to serve all your credit card debt dues. Consolidation can help you convert your multiple dues into one wholesome due. This will surely result in reduced installments.
Take assistance from a credit card debt settlement company: you can ask for assistance from some credit card debt settlement organization. They know how to deal with the situation or negotiate with the credit card companies. You can search for the reputable companies online. Before you take their services you, must research about them all. Read the reviews and testimonials by the past clients to know about its authenticity. Make sure the staff is well qualified and professional to tackle this responsible job as it concerns your financial life. Not only this, the staff needs to be cordial and must understand the present situation of the client and provide assistance accordingly.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.