What you can do about your debt could depend, in part, on how current (or how past due) your payments are. There could be a few options available to you when you’re up to date on all your payments. But, at least one debt relief option is only available when you’re past due.
When you’re current on all your payments, you may have more debt relief options. You could decide to pay off on your own – that’s if you have enough money to make it happen. You might be able to enroll in credit counseling. Or, if you qualify for a loan, you could consolidate your debt. However, being current on your payments likely puts debt settlement out of the question, unless you’re willing to fall behind.
When you’re delinquent on your accounts, your options are probably limited. They usually become even more limited the further behind you fall. For example, you may be able to pay off your accounts on your own, but you’ll have to get caught up first. Otherwise, your accounts could eventually be charged-off and sent to a collection agency. You could still pay the accounts at that time, but you may have to pay the balance in full instead of making monthly payments.
One option when delinquent could be credit counseling programs that put you on a debt management plan. But, the creditor may require you to bring your account current before they lower your interest rate and minimum payment. In such case, if you’re too behind to catch up, credit counseling won’t help you.
Delinquency could also make it difficult to consolidate your debts. For debt consolidation to work, you have to be approved for a loan that’s large enough to pay off your debts. An unsecured, signature loan will likely require you to have good credit, something you probably don’t have if your payments are past due.
Thus, you typically have two options for dealing with your debt when you’re delinquent – debt settlement and bankruptcy. Most people want to avoid bankruptcy because of its long-lasting effects. Bankruptcy stays on your credit report for up to 10 years. Many businesses still want to know if you’ve ever filed bankruptcy, even if it has been decades after the listing has been removed from your credit report. You can’t lie because you’ll be guilty of fraud if you’re ever found out. Also, bankruptcy doesn’t go away just because it falls off your credit report, it’s still on record with the court where you filed.
The other likely option for when you’re delinquent is debt settlement. In debt settlement, you (or a debt settlement company) negotiate with your creditor to usually reduce your balances by 40% to 60%. If they agree, you make the lump-sum payment and the creditor writes off the rest of the balance. The catch is that you may need to have the money to settle your accounts within a few days of the creditor’s acceptance. Otherwise, the offer may be rejected and the creditor may not entertain another offer when you do have the money.
If you’re behind on your payments and don’t think you can get caught up, but don’t want to file bankruptcy, give debt settlement a closer look. It may be the perfect solution to dealing with your delinquent debt.