e-book Negotiate and Settle Your Debts - A Debt Settlement Strategy

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To eliminate uncertainty, you can use Guardian Debt Relief, which charges between 15 and 20 percent, depending on state, on all settled debt. Companies in this industry charge 15 percent on the low end of the range and 25 percent on the high end, making Guardian one of the more reasonably priced debt settlement programs. Guardian is one of the smaller settlement firms we reviewed, offering plans in only 17 states. Still, it has good customer service, though it took longer than other companies to get back to us. Guardian assigns you a dedicated point of contact who always works on your program — a plus if you like personalized service.

Pacific Debt Inc. Every time we sent an email or left a message, we got a prompt reply within an hour or two. However, we noticed its agents weren't as thorough in explaining the specifics of debt settlement plans as reps from other companies. Pacific Debt Inc settlement plans have industry-standard lengths and fees. It claims to be able to settle for as much as 50 percent of the debt enrolled, which is a little higher than most programs. The service operates in 32 states. A debt settlement program can take between two and four years. These are the funds that will make up the settlement offers the debt relief company will make to your creditors.

After about six months the settlement company will begin negotiating with your creditors. The best settlement companies offer client portals that allow you to track your funds and settlement offers. Since the settlement industry has moved away from advance fees. The amount varies depending on the state you live in, since some states have caps on the percentage they can charge. The fee you pay a debt relief company is a percentage of the debt you want it to settle for you. Some states put caps on that percentage, but in general we saw a range of 15 to 20 percent. One thing to note is that this is on top of what you pay your creditors.

It can still be worthwhile, but make sure to include the fees in your savings projections. Another thing to keep in mind is that your debts are going to continue to accrue interest. In our interviews with debt settlement companies, they assured us that your monthly payment accounts for penalty rates and late fees.

The settlement companies we interviewed all offer flexibility in these situations, letting you divide your payment into monthly installments. Debt settlement is only one of many options for managing debt when it gets out of hand. The best debt settlement companies will recommend the ideal option for you. Several of the programs we reviewed partner with credit counselors, and some offer debt consolidation loans.

In some cases you may not meet the debt requirements to enroll in a settlement plan. These are non-profits that can give you guidance on budgeting or enroll you in a debt management plan. In a debt management plan the credit counselors will negotiate a reduction on interest rates and fees with your creditors. These take longer than a debt settlement plan, typically five to seven years, and can also be detrimental to your credit score.

While debt settlement and debt consolidation are used interchangeably by many in this industry, an actual debt consolidation loan is different from a debt settlement plan. With a debt consolidation loan you get a loan to pay off your creditors and then only make payments to one lender, usually a bank or a credit union, though a few of the settlement companies in our review have a separate division that offers debt consolidation loans. A debt consolidation loan has more stringent requirements than a debt settlement program. You may need to meet income requirements or have a certain debt-to-income ratio.

You may also need to provide collateral, such as home equity, to be eligible. This is the final resort for managing your debt. Bankruptcy is a legal process that can allow you to get rid of your debt. Chapter 7 bankruptcy, which has strict income requirements, can liquidate all your debt, though some of your assets will be sold to pay it off.

A Chapter 13 bankruptcy requires you to work with your creditors to create a payment plan. Bankruptcy is very damaging to your credit score and can impact your future eligibility for loans and lines of credit. A bankruptcy will stay on your credit report for seven to 10 years and can reduce your score by up to points. You can settle debt yourself, without the assistance of a debt settlement company. In fact, some creditors refuse to work with settlement companies. However, it can be time-consuming to negotiate for yourself and may not be the best option if you have a lot of creditors to settle with.

DIY debt settlement follows a similar process to settling with the help of a company. You stop making payments and start saving up with the goal of making a discounted payment on your entire debt amount. To settle your debt, you need to be at least days delinquent on your payments. After five months, your creditors will send your debt to collections agencies, which may make them more willing to settle with you.

Debt Settlement: A Guide for Negotiation

Creditors typically prefer lump-sum payments, though in some cases you may be able to negotiate a reduced-cost payment plan. This action should be your first step in the settlement process. Before you attempt to settle a debt, check the statute of limitations on the debt. Collectors only have a certain amount of time to sue you for payments.

If your debt is too old, the collector can't take you to court. You can determine if the statute of limitations for collecting a debt in your state has passed. If you find the debt is older than the statute of limitations, tell any bill collector calling you they are wasting their time by harassing you for an uncollectable debt, as neither they nor the original creditor nor the assigned collection agency can take you to court to get a judgment.


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After seven years in most cases , a negative mark and the related collections will disappear from your credit report. If the debt has gone unpaid for seven years, then it can no longer legally remain on your credit report. Before the seven-year mark, you must challenge this listing on your credit report to get it off.

You can see how long a negative item remains on your report. However, even though a debt may no longer legally appear on your credit report because it's too old, you could still be sued if the statute of limitations for your debt in your state is not up. If your debt meets both of the above conditions, it is uncollectable and it cannot appear on your credit report. If you get to this point, stop here; you are done, so don't worry about the debt.

With a secured debt, a piece of real property such as an automobile or a home is promised if the debtor can't finish making payments, or defaults, on the loan. You will not be able to settle these debts, as the creditor will simply accept the promised property as the settlement. With unsecured debts, there is nothing attached to the loan promised as repayment. Unsecured loans are typically given to people with good credit, due solely to the fact that they have good credit.

These are the type of debts that a creditor is willing to settle, as they have no way to guarantee they will receive anything from you. You have the natural advantage in debt settlement, because you have something the creditor wants.


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Don't cave in when they first tell you no. Remain calm and don't lose it and get angry. It's usually best to correspond with them via letters, so you have a paper trail of all your actions. Keep the attitude at all times that the collection agency will take less money than they say they will.

3 Strategies to Getting the Lowest Debt Settlement Possible

Debt collectors are not hurting for money. It may be worth it to pay the taxes on the amount of debt that you don't have to pay, if you can dramatically reduce what you owe. This way, if they don't honor what you both agreed upon, you could use what they sent you in writing as proof.

You'll also need it if you want to make corrections to your credit report, should your creditors report you incorrectly. Perk: You'll see your credit score rise as a result of reducing your debt. It will jump even higher when you pay off the debt you've negotiated down. Thirty-five percent of your score is based upon how much debt you have in comparison to your income. Bonus: Need some more help getting on financial track? Tiffany " The Budgetnista " sharer of all things, frugal, fun and fabulous.

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3 steps for credit card debt negotiation

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General Debt Negotiation Strategies

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