Be aware that these companies charge fees for their service. In many cases, the fees are 20 percent to 25 percent of the savings that they can give you. Ask the representatives of the company the charges.
Obtaining a settlement of 25 percent to 40 percent of what you owe is common. Ask to have the settlement details of your Chase card settlement sent to your house in writing so that you can keep them for your records.
Personal Finance Debt. Step 1. Video of the Day. Step 2. Step 3. Step 4. Late payments may remain on your credit report for up to seven years. Consumers can expect harassing debt collection phone calls once they become delinquent.
Chase, for example, will not work with debt settlement firms. It will only work directly with consumers or with nonprofit, licensed credit counseling agencies that help consumers. When the process works as intended, debt settlement can benefit everyone involved. Consumers get out of debt and save money, debt settlement firms earn money for providing a valuable service, and creditors receive more than they would if the consumer stopped paying altogether or entered chapter 7 bankruptcy.
Exempt assets vary by state but often include household and personal possessions, a certain amount of home equity, retirement accounts, and a vehicle. It is a legal process that can stop collection calls and lawsuits. Debt settlement doesn't offer those guarantees. A consumer may have to surrender property they may feel they need to keep. Or they may not want their financial troubles to be a matter of public record.
Another problem many indebted consumers face is not being able to afford a bankruptcy attorney. Chapter 7 bankruptcy can be over and done after three to six months, versus years for debt settlement. It can be less stressful and may allow your credit score to recover faster, though bankruptcy will remain on your credit report for 10 years.
Make sure you can afford debt settlement. Many debt settlement programs may require you to deposit a specific amount of money into a specified savings account every month for 36 months or longer. Before you sign up for a program, make sure that you can afford to set up the required amounts for the entire length of the debt settlement program. Making minimum monthly payments on high-interest debt is not a good option for consumers who want to save money. It can take years—decades, even—depending on how much debt you have and what the interest rate is.
Interest compounds every day on your entire balance, and with minimum payments, you make little progress paying your balance down each month. Consistently making minimum monthly payments and forking over tons of interest might make you highly profitable to your creditors, and, yes, solid payment history is good for your credit score. Consumer who consistently make just the minimum monthly payment on high interest credit card debt can end in paying more in interest than the principal.
Credit counseling is a free or inexpensive service provided by nonprofits and government agencies. Interestingly, these services are often partly funded by credit card companies. By enrolling in a debt management plan with a credit counseling agency , you may receive an interest rate reduction on your balances and a waiver of penalty fees.
Those concessions may or may not be sufficient to help you pay down your debt considerably faster, and you may or may not be able to afford the new required monthly payments. In addition, you may not qualify for an interest rate reduction, even if you have a significant financial hardship.
Also, credit counseling may offer additional financial assistance that can help you avoid similar problems in the future, such as budget development and financial counseling, and referrals to low-cost services and assistance programs to help you reduce your expenses.
Fox says a credible debt settlement company will also work with clients to help them learn how to budget, use credit responsibly, and live within their means. At the same time, debt settlement and bankruptcy help those who have more significant financial stress.
The Federal Trade Commission website has helpful information about how to choose a credit counselor. The National Foundation for Credit Counseling is another good resource. The best way to negotiate a credit card debt settlement yourself is to call your lenders and ask them if you can be put on a plan to settle your debts.
Some creditors will work with you, depending on your situation. A debt settlement stays on your report for seven years from its original delinquency date. If you are looking for a good debt settlement company , you could ask your friends and family if they have any recommendations, ask your financial advisor, or look for online reviews.
For example, Consumer Affairs magazine publishes a reliable list, and the Federal Trade Commission FTC offers information about both credit counseling and debt settlement companies.
Unfortunately, debt settlement scams are not uncommon. For-profit companies claiming to "eliminate your debt" for a high fee may be scams. These charlatans will typically ask you to pay a high amount for their services but do little or nothing on your behalf. These companies may say they have ways to "fix" or remove adverse credit from your report, which is not possible to do.
In addition, a debt settlement scam can put you into even more debt if the company claims to have contacted your creditors, and they don't, leaving you to believe your debt is paid off. Depending on how your credit card company reports the debt to the major credit bureaus, a lump-sum settlement can affect your credit scores. And your debt is deferred — not forgiven — so you still must pay it. On the other hand, a settled account can remain on your credit reports for seven years, which makes it challenging to take out a future loan, Sullivan says.
Also note that debt settlement companies charge hefty fees for their services. Keep in mind that your forgiven debt may be considered taxable income as well. Save the fees and do the work yourself. First, ask for the department that handles debt settlements or collections. You may want to prepare a script beforehand, so that you know exactly how to frame your request. Clearly and politely explain your financial situation and ask for exactly what you want.
Document every conversation you have. Write down the names and job titles of anyone you speak to so you can reference them in follow-up calls if necessary. The credit card manager you made a verbal agreement with may leave the company or your account may accidentally be sent to collections. Anything can happen, so protect yourself by putting it all on paper.
But Jacobs and Sullivan say not to discount tried-and-true money management strategies before declaring bankruptcy or paying a debt settlement company.
These management strategies include sticking to a strict budget, getting part-time work to boost your income, or negotiating lower interest rates and monthly payments. Image: Man sitting in kitchen, speaking on phone with his credit card company and negotiating his debt.
In a Nutshell Consumers facing financial challenges can negotiate credit card debt with their credit card company. Learn about the different options to settling your debt, as well as the steps to negotiate with your card company.
0コメント