Debt settlement means paying your creditor a lesser amount than what you owe. There are situations where settlement is the only way out. At such a time, you need a professional debt settlement attorney by your side.
Don’t immediately jump to settlement. This should be your last option. Seeking the advice of a debt settlement attorney helps a lot in determining what is your best option, considering the financial situation you are in. When you can no longer keep up with paying your debts or you’ve caught yourself in the cycle of borrowing money to pay for your debt, it’s time to act and seek the best option. There’s debt consolidation, bankruptcy or settlement. If you think that debt settlement is your best shot, follow these helpful tips.
Don’t Wait Until an Account Is “Charged-Off”
Acting early is your best shot at getting a debt settlement. A “charged-off” account usually occurs when you are more than six months behind your payment. When you are marked a charged-off account, it means that the creditor believes that the chances of him/her getting repaid is slim. This does not take your debt away, and it will only make it difficult for you to settle. So if you have plans of settling, do it quickly and don’t waste time.
However, if your account has been charged-off, hope is not altogether lost. Some creditors are still willing to discuss and agree upon debt settlement even when your account has become delinquent. But if you can, act as early as possible, as this does not only allows you to settle your debt, it also gives you more options to handle the situation.
Consider the Effects and Consequences
This is the reason why debt settlement should be avoided if possible. There are consequences that might affect you in the future if you settle your debt. For example, if you get a debt settlement, it will have a negative impact on your credit report. This in turn makes it difficult for you to get a loan in the future at a low interest rate. When you settle your debt for less than what you actually owe, that gives a bad signal to future creditors. Another effect of debt settlement is giving rise to tax. For instance, if you settle for half the amount of your actual debt, what you pay becomes taxable. With this, it’s best to consider the effects and consequences before calling it in.
Avoid Making Unrealistic Promises
As the saying goes, don’t make promises you can’t keep. This applies to both your promise to the creditor and yourself. This is why it’s very important that you set payments that are within your financial capacity. Set payments that are realistic and manageable. When you or your debt settlement attorney negotiate with the creditor for a settlement, be honest with the former and with yourself. Be realistic. Because if you don’t and you fail to comply with the payments, your account will be referred to a collection agency. And you wouldn’t like that to happen.
Be Open and Honest
When the creditor asks you to show your financial cards, just be open and honest. Creditors normally would want to take a look at your income, existing debts and assets, among others, before they agree to settle. They do this to get proof of your financial capacity. By doing this, the creditor will be sure that you’re not that just doing it to avoid payment and save money. Creditors want to see to it that you are really not financially capable to pay the full amount.
Once you have paid the debt settlement, double check your status. Make sure that it is shown in your credit report that you have indeed paid the said amount. Do this just to make sure, because there are creditors who fail to report settlement payments. If you don’t check it and the creditor failed to made such report, your account will be listed as an “indefinitely delinquent” despite the fact that you have already paid. It will appear that you still owe the creditor even if you have fully complied with your obligation.
Debt settlement has its pros and cons. But if you really think that this is your best option, considering your financial status, then by all means get a favorable settlement. If you do so, don’t forget to apply the abovementioned tips to your advantage. To make things run smoothly and to see to it that you are legally protected when you settle your debt, hire a reliable and experienced lawyer that specializes in debt settlement.