Debt settlement can be a tricky process. Making a mistake in the settlement process could hurt your chances at getting the creditor to agree to a reduced payment. It could ruin your settlement plans completely. These are some of the worst debt settlement mistakes you should avoid.
Taking out a cash advance before settling a debt. If you open a new credit card, take out a cash advance, or transfer a balance within a few months before trying to get a settlement, the creditor will probably turn you down. Often, these types of transactions look like you’re trying to commit fraud or knowingly take advantage of the system. To get a settlement, your creditor must believe that you’re struggling. Making transactions like these don’t usually help your case.
Trying to settle just one credit card debt. Your creditors can know which accounts you’re past due on and which have current payments because (more…)
Wage garnishment is usually a debtor’s worst fear. It lets a creditor or debt collector take payments directly from your paycheck before you ever receive it. Once a creditor has the permission to garnish your wages, you no longer have any say in paying them or not paying them. After a creditor starts garnishing your wages, it could be hard to stop the garnishment unless you can pay off the debt or prove that the garnishment isn’t legal.
How Garnishment Happens
A wage garnishment shouldn’t come as a surprise. Creditors have to go through several legal steps before they can start garnishing your wages and you should know about these steps. First, they need to sue you and win a lawsuit judgment against you. You’ll be served with a notice of the lawsuit and given the opportunity to respond before the suit goes to court. You can also show up in court and defend the debt, for example, by proving that the account is beyond the statute of limitations.
If the creditor does win the lawsuit and gets a judgment, they won’t automatically get a wage garnishment. Before that, you’ll be given the opportunity to pay up. But if you’re not paying the judgment on your own, the creditor can ask the court for permission to garnish your wages. Subject to your particular jurisdiction, you’ll usually be sent a notice 30 days before the garnishment starts. During that period of time, you can strike a deal with the creditor. Otherwise, the garnishment will proceed.
As you can tell, you have several opportunities to do something about a debt before it gets garnished from your wages. However, some types of garnishments you may not be able to stop. This includes (more…)
Some debts are hard to settle. There are even some that can’t be settled at all. Take inventory of your debts to see which ones fall into the categories of difficult and impossible to settle. A few of these debts will have to be paid in full, while others may need more time to become delinquent before you can settle them.
Credit cards you just opened. A creditor won’t be too willing to settle the balance on a credit card you only recently opened. They’re more likely to assume you committed fraud by charging a balance you know you couldn’t repay. If you know you’re going to settle your debts, don’t apply for any new credit cards. But, if it’s just a coincidence that you opened a new card then fell on hard times, consider keeping that card out of the settlement program by making your regular minimum payments. Or, consider settling it after you’ve already settled other accounts.
Credit cards that aren’t delinquent. It will be nearly impossible to convince a creditor to settle on an account that’s current on all the payments. That’s because these accounts are potential moneymakers for the credit card issuer. Don’t think you can save your credit and settle your accounts. You’ll typically have to be a minimum of 90 days past due before you can settle any accounts.
Credit cards with recent charges or balance transfers. For a similar reason that makes settling a new account difficult, you’ll find it hard to settle an account that you’ve recently used to make a new purchase or transfer a balance. (more…)
When it comes to credit card debt, creditors, of course, have their own agenda. They want to get as much of your balance from you as possible. It’s even better if they can collect interest on your balance by letting you pay it over time. But, when you’re thinking about going the debt settlement route, it could help to know the creditor’s point of view. If you’re doing settlements on your own, then this knowledge will likely help you in the process.
Timely Payments Are Best
If you’re on time with all your payments, creditors likely aren’t interested in settling. Even if you tell them you’re struggling to make ends meet, the most they’ll probably offer is a temporary reduced hardship repayment plan, if that. They may instead refer you to a credit counseling agency. Credit card issuers would love it if you paid the minimum payment for decades until you finally paid off the balance. That would mean they get the maximum amount of interest from you.
Are You Really Having Payment Trouble?
Creditors will also likely look for signs that you’re not really having a hard time making your payments. For example, while you’re on the phone with a creditor, they may simultaneously view your credit report (they can do that without getting your permission first). They’ll look at your credit report to see if you’ve been keeping up with payments on your other debt obligations. If you’re current on any other debt payments, your pleas for a reduced payment or even (more…)
In the debt settlement process, you may deal with a number of different businesses. It’s not always easy to tell who you’re working with, but it’s important to know because it could affect how low you can expect to negotiate your debt. Creditors may push for higher settlements, while junk debt buyers may accept just a small percentage of the outstanding balance.
The Original Creditor
The original creditor is the bank that issued you the credit card or loan. When you first go delinquent, they’re the ones you’ll typically deal with. You may only have a limited time to deal with the original creditor because after several months of non-payment, they may assign your debt to a collection agency or sell it to a junk debt buyer.
The original creditor may offer a settlement after you’ve become delinquent or you can make a settlement offer to the original creditor. Many people miss the opportunity to settle with the original creditor and avoid a charge-off because they don’t have enough money saved up so early in the collection process. Settlements with the original creditor can be more expensive than those with a collection agency.
Junk Debt Buyers
Junk debt buyers are companies who purchase old debts from the original creditor. They often buy these debts for very little money – often just a few pennies for every dollar, or maybe even (more…)
When you have a lot of debt, you may wonder whether you truly need to seek debt relief or if you can manage your debt on your own. Here are some signs that you probably can’t handle your debt or monthly debt payments.
You transfer balances to keep from making a payment. Balance transfers don’t really qualify as a payment on your account. While you can dodge making a payment this month, your balance is actually growing. Each time you transfer a balance, you’re adding a 3-4% balance transfer fee. That’s $300 to $400 each time you transfer $10,000. As your balance grows, so does the transfer fee each time. After a year of balance transfers, your balance could grow almost $5,000.
You’ve missed payments on your account. You can typically catch up easily if you only miss one payment on one account. However, if you repeatedly miss payments it’ll become harder to make the minimum payment you need to get caught up, even harder if you miss several payments. If you foresee a problem making your next credit card payment, you should seek debt relief.
You have to choose between making your credit card payments or another payment. When your budget gets tight, you may face the difficult decision of whether to pay the Discover or the Visa this month, or whether you should pay your credit cards or your mortgage, whether you should buy groceries or keep the credit card company from calling you.
Credit card issuers have closed one or more of your accounts. Your card issuers take note of how much you’re paying toward your credit card balance each month. If you’re making the minimum payment month after month, your credit card issuer may (more…)
It’s unfortunate for the good debt settlement companies that so many bad companies have ruined the industry’s reputation. New additions to the debt relief laws in the United States hopefully means that bad settlement companies will be less prevalent and the good companies will be easier to find. When you’re shopping for a debt settlement company, here are some tips to help you pick out the best ones.
They don’t ask you to pay upfront.
Perhaps the best indicator that you’re dealing with a good debt settlement company is that they don’t charge a fee on debts they haven’t settled. Instead, the fee is typically charged after the settlement agreement has been signed and the settlement payment has been made to the creditor. You’ll probably have to contribute some money to the settlement firm each month for debt settlement to be successful, but that money will probably be deposited in an account to pay your creditors once you’ve accumulated enough.
They take time to understand your debt.
A debt settlement company shouldn’t be in a rush to (more…)
If you’re thinking you can settle your student loan debt for 40% to 60% less than what you currently owe, think again. Student loans are nearly impossible to discharge in bankruptcy and therefore just as difficult to settle. If you’ve defaulted on your student loans, your best option is to figure out how to get caught up. Otherwise, you could be sued for the debt.
Consequences of Student Loan Default
Student loan default happens after you’ve fallen behind on your student loan payments. The default goes on your credit report and will stay there for up to seven years. You’ll likely have a hard time getting approved for other credit cards and loans as long as your student loans remain in default.
After a student loan default, you may realize the government is bigger than you think. Defaulting on federal student loans could result in having your tax refunds taken by the IRS. Yes, these government agencies may work together to collect your student loan payment.
The government can take more than just your tax refunds. They could garnish your wages or levy your bank account and may not even have to go through the court system to do it. Part of your Social Security benefits could also be taken to pay back your student loans.
Rehabilitate Your Student Loans Out of Default
Once a home has been foreclosed, it’s almost always foreclosed. Once a vehicle has (more…)
It is advisable to keep a vigilant eye on your finances on a consistent basis and make sure you are spending within your means. Although, for some, life takes a turn for the worst and before they realize it, they are overwhelmed with debt. Well, at DebtSettlement.com, we want to help! We want you to make an informed decision! The following list may serve as a useful resource to learn how certain debt settlement companies work, what you might want to look out for when selecting a particular company and some of the problems that may arise from choosing this option. These resources are listed in no particular order so jump right in and figure out if debt settlement is a good option for you!
- Decrease Credit Card Debt – This site offers various options for credit card debt relief, tips for those who prefer to do debt settlement on their own and contact information to speak with a debt analyst about available programs.
- When Debt Settlement Makes Sense – A source for those who are debating whether debt settlement is right for them. It also points out what people should look out for when selecting a debt settlement company.
- Financial Solutions – This source tries to help you decide whether debt settlement is the right choice for you.
- The Association of Settlement Companies – A resource for debt settlement companies and a well-known source for information on the debt settlement industry.
Soon after your last settlement has been paid, you’ll want to start repairing your credit. Credit repair is likely necessary if you want to save money on interest, insurance or security deposit. It will take some time to get your credit score back to where it was before you settled your debts, so starting soon is best. Here are some things you should and should not do while you’re repairing your credit.
Start by checking your credit report.
You need to make sure the details of your settlements are reported correctly. For each settled account, the balance due should be $0 and the payment status should say “Paid” or “Settled” or something to that effect. You can check your credit report by visiting AnnualCreditReport.com or any of the three credit bureau websites.
Don’t let errors go uncorrected.
If your settlements aren’t reported as described above, contact the creditor to make sure everything was processed correctly. You can also dispute the error with the credit bureau and it helps if you have a zero balance letter showing your account has been settled in full. Otherwise, you can send a copy of your settlement offer and proof of payment along with your dispute.
Get new credit to help rebuild your credit score.
To improve your credit score, you likely need to (more…)