Many of my clients have been asking me lately about Debt Settlement for their high interest rate Credit Cards that are killing them each and every month. Let's face it, in today's prevailing economy, we are all trying to reduce our monthly expenses and Debt Settlement may be a legitimate solution for millions of people who are struggling with excessive debt. Many of these people are also looking into the possibility of bankruptcy. And while that may be another possible solution, the bankruptcy laws have changed very recently and this is not as easy as it once was. You should definitely consult with an experienced bankruptcy attorney.
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So is Debt Settlement the right choice for you. Let's take a look at 5 questions you need to know the answers to, before you sign up with just any company that calls you out of the blue.
1. Who is qualified for a debt settlement program?
A Debt Settlement program is designed for people who are facing serious financial hardships and experiencing difficulty in making their monthly payments. This means people who are late on paying their debts, maybe have little or no ability to pay their debts in the future and are facing a possible bankruptcy. It is not for people who have reasonable means to pay off their individual debt. You need some kind of hardship!
2. How are my debts settled?
You will be set up with a 3rd party trust account that you will make payments into. Think of this as a big savings account. How much you pay into this account will be determined by the total amount of your debt and your ability to make payments. As your balance grows in your savings account your negotiator will work out a settlement amount with your creditor. You will be contacted to see if this is an agreeable amount. If you agree, you will be the one who releases the fund to settle the account.
3. Do I have to put in all my debt, like a bankruptcy?
One of my favorite things about doing a debt settlement, rather than a bankruptcy is you get to choose what debts you want to include in the settlement program. If you want to keep a small card available for emergencies, that's fine. In a bankruptcy, your information is available to anyone as public information. A Tax/Debt Help program is completely confidential. Your friends and family will never know unless you tell them yourself.
4. Does Debt Settlement have a negative impact on my credit?
Yup! Your credit score is definitely going to take a hit. Most of your cards will read as a "charge off" on your credit report. As your debts are settled, your creditor should notify the credit reporting agencies that the account has been settled. Your credit will naturally start to repair itself as the accounts are settled.
5. Would Bankruptcy be a better option for me?
I always think that it is best to discuss bankruptcy options with a qualified attorney to see if it may suit your needs. It is an expensive option and may take a much longer time to finish. It also is public record.
Any program that you enter into needs to be approached with patience and persistence. It took you quite a long time to get into the situation you are currently in and it is going to take awhile to get your financial life back in shape. The best debt settlement companies are those that have attorneys who supervise the entire process for you. That way you have an advocate working for you that truly cares about your outcome and not just a payday.
What ever you do it is ultimately up to you. If you are drowning in debt, it is not going to go away magically. You need to take the first step to rid yourself of this once and for all. By simply reading this article you have taken the first step to becoming completely debt free and reclaiming your life. Congratulations!!! Just think of everything you could do once you do not have those monthly credit card payments to contend with!
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