Will Debt Settlement Help?
While we sometimes may forget to do the things we intend to do, the fact that we want to do them in the first place deserves some credit, right? For example, most of us want to get our holiday or thank-you cards in the mail on time and we want to remember to call Grandpa more regularly or send Mom flowers on her birthday. But does this same "wanting" apply to wanting to pay bills? It sure does!
As each bill arrives, you probably make a mental note or jot down some reminder about when to pay it. But when it's time to make that payment, you simply don't have the money. You want to pay that bill and maintain a positive financial history, but the bottom line is you just can't.
So when the wanting isn't enough, and you can't afford to repay your debts in full, don't think bankruptcy is your only option. Instead, you owe it to yourself to learn whether debt settlement can help.
How Can Debt Settlement Solve My Debt Problems?
Debt settlement is a negotiation by a settlement service provider or lawyer with your creditors to pay back a portion of your unsecured debt. Here's how it works:
- You partner with a debt settlement provider that reviews your financial situation and structures a flexible payment schedule you can afford.
- You make monthly deposits to a special settlement escrow account at an FDIC-insured institution. Deposits build in value over time and you may earn interest on those funds, depending on the account type.
- After you build a "nest egg" of savings, your debt settlement company approaches your creditors with an offer to settle your accounts for a portion of the amount owed.
- Once settlements are reached, your provider initiates payments to your creditors using funds you've saved in your escrow account. You continue making deposits to the account until you pay off your discounted obligation.
Settlement typically takes three to five years to complete, based on your debts, your provider's estimates of what your creditors will accept to settle your debts, and how quickly you save the necessary settlement funds.
Who Fits the Debt Settlement Profile?
Debt settlement is an attractive alternative to bankruptcy for individuals with at least $7,500 in debt and who have stopped paying their unsecured creditors, but want to pay back at least a portion of their debt. Eligible participants must be able to repay at least half of their debt, along with any fees charged by the plan's provider. Your provider will likely charge you a "success fee" for settling each debt or structure some other fee system. If everything goes as planned, consumers benefit from the relief of repaying a percentage of their debt in full satisfaction of their total debt over a period of time.
Coming back to fees, note that reputable debt settlement providers only operate on a success fee model - rather than require you to pay any fees in advance of settling any of your debt. At CareOne, we only collect the success fee after we effectively negotiate a settlement for our customer.
How Can I Succeed on a Debt Settlement Plan?
To improve your chances for success, educate yourself about your options, set an affordable payment plan and stick to it. Here are some additional tips:
- Read and understand your agreement with your provider. While settlement can provide great benefits to someone facing bankruptcy, there are credit implications to consider and understand. Any reputable debt settlement provider should discuss those with you. Also, review your agreement carefully so you understand the details of your plan, its requirements and fee structure. Keep a copy handy, along with any other plan information, for easy reference.
- Make timely payments. Your success hinges upon your ability to make timely payments into the settlement account and build up its value, as well as your creditors' willingness to accept the settlement terms. Creditors expect to receive new payments in a timely and consistent manner until the negotiated amount is satisfied. If you miss a payment, your creditor may withdraw the settlement and you could once again owe the entire amount. So, once your provider negotiates a settlement plan, don't miss a payment.
- Deposit any extra earnings or bonuses into your settlement account. The faster you build your account balance, the faster your provider can attempt to negotiate your debt.
- Manage aggressive collection activities. With debt settlement, there is the risk of increased collection activities and escalated collector calls. While those actions should stop once a settlement agreement is reached, contact your debt settlement provider for help; they may connect you with an attorney who can help you handle increased collection activities at a reduced fee. Also, know your rights so that you don't fall victim to unfair debt collection practices.
- Review all communications from your creditors and debt settlement provider. Monitor your accounts online or by telephone regularly. And if you ever have a question or notice a discrepancy, act on it immediately.
- Plan for a smarter future. Upon settlement, your credit report may show "paid as agreed," or "settled," as opposed to "paid in full" for those accounts. This can remain on your credit report for up to seven years. In the meantime, budget within your limits and work closely with your settlement company to better manage your finances both now and in the future.
If debt settlement may only be the first step in resolving your debt. It is equally important that you take an active role in your own success by making good financial decisions well after you've climbed your way out of debt.
For example, take advantage of your debt settlement provider's tools, resources and practical advice to build the right financial plan for your future. Debt settlement from a reputable provider like CareOne Service, Inc., which has helped more than 4.5 million people with their debt, can certainly be a part of that strategy.