A bankruptcy is not the only option you can take to deal with your debt. In fact, a bankruptcy should be seen as a very powerful tool that you should only use if you have no other way out of your debt. Individuals that may consider a bankruptcy are those that are falling behind payments, living paycheck to paycheck, or who are facing wage garnishments or foreclosure. A bankruptcy will ultimately impact your credit score and will appear on your credit history for years. Though there are many benefits to a bankruptcy, if you are an earning individual with a good credit score, you may not want to file a bankruptcy. A good option for earning individuals that are under financial stress is to create a debt settlement program. If you are falling behind on your payments, it is a good idea to consider a debt settlement before you continue with a bankruptcy.
A debt settlement program is a right option for individuals that have the potential to pay back debt. In many cases, a creditor or debt collector will work with you on a debt settlement. If you are considering a debt settlement or if you bring the debt settlement to your creditors, they will understand that you are facing economic hardships. In addition, they may already know of your economic status if you are falling behind on your payments. Creditors and debt collectors hate bankruptcies because in most cases when a debtor files a Chapter 7 the creditors or debt collectors will usually receive zero or partial compensation. A debt settlement is more favorable than a bankruptcy which is why a debt collector will be open to the discussion.
The problem arises when you create a debt settlement program that your creditors cannot agree on. When your creditors or debt collector cannot agree or accept your debt settlement program, you will be required to keep up with payments under their regulations. For instance, if you bring a debt settlement program to a creditor or debt collector, they may refuse the program and require you to pay the amount you owe. In addition, the creditor or debt collector may pursue any debt collecting activity such as foreclosure, wage garnishments, and continue with annoying emails and phone calls until the debt is paid off.
We believe that if you are working on a debt settlement program it is something that should be honored. Debt settlement programs show initiative and willingness of taking care of your debt. However, the issue is that in some cases, a creditor or debt collector may not agree and it may lead to other consequences. Debtors that want to approach their debt through a debt settlement, may want to speak with an attorney. An experienced attorney will be capable of negotiating your debt so that you may pay what is reasonable for your circumstances.
When you are far behind on your payments the creditor or debt collector may reduce the amount you owe so that you may be able to pay back the debt. In most cases, a debt collector will honor a debt settlement, but it will require that you create a debt settlement program that works for both parties. If you work with an attorney, you will have a person that is capable of contacting the debtors with your debt settlement. The attorney will act as the middleman so that you do not have to interact with your creditors. In addition, an attorney will help you draft a debt settlement program and will help you modify the program until you reach an agreement with the debt collector. Bringing up a debt settlement to your creditors is an easy task when you have the right backing. If you wish to speak with an attorney about your debt settlement program or to learn about the benefits of a bankruptcy, you may contact the Bankruptcy Attorney at 424-285-5525.
How does a debt settlement work?
A debt settlement also known as debt negotiation is a way that a debtor can formally negotiate with their creditors to establish a payment program. A debt settlement program can help you pay off your unsecured debt such as credit card debt or medical bills. When you establish a debt settlement program you may only be required to pay back a portion of the debt. For instance, upon reaching an agreement with a creditor, you will be able to pay back a portion of the debt at lower monthly payments. A debt settlement program is supposed to help a debtor get back on their feet by establishing a repayment program that suits their economic capabilities.
When you approach your creditors about your debt, you will want to negotiate the lowest possible amount of the debt to pay back. For instance, you may offer your creditors a 25% of the debt to be paid back over a period of 6 or 12 months. The creditor then has the opportunity to either accept or reject the offer. Usually, below thirty percent is considered low so the creditor may try to nudge you an upward of fifty percent. If you are a good negotiator, you are encouraged to speak to your creditors to see what is the best they can offer. If you are not a good negotiator, you may want to speak with an attorney. An attorney has the skill to review any credit contract and may be able to use his or her negotiation skills to get you a fair repayment program. When you work with a bankruptcy attorney, you will not have to worry about the negotiation portion of the debt settlement. Negotiation requires skill so sometimes it is better to leave it up to an attorney.
A debt negotiator such as an attorney may be able to reduce your debt settlement payments and will achieve a debt settlement program that works for you and your creditors. Keep in mind that if you are not able to achieve a debt settlement, you may proceed with a bankruptcy. A bankruptcy provides more protection to the debtor and your creditors will be required to work with you if they fail to work with you during a debt settlement.
When you contact an attorney about your debt settlement, you will want to provide him or her with a list of your creditors indicating how much is owed to each. In addition, you will want to inform your attorney about your financial affairs. Letting your attorney know how much you earn and of your financial obligations will help the attorney negotiate on your behalf. In addition, an attorney will help you create a debt settlement program that works for you. In some cases, an individual seeking a debt settlement program will promise to pay more than he or she can. Most debtors want to pay off their debt as fast as possible, but should only do so if they have the means. If you are living pay check to pay check, you will have to create a reasonable debt settlement program that will let you enjoy life without having to worry about your paycheck. An attorney will help you establish a debt settlement program that works for you. Upon establishing a debt settlement program, an attorney will present that program to your debt collectors. Since your attorney will be well informed about your economic situation, the attorney will be capable of negotiating a program that will work for your situation.
Challenges of a Debt Settlement
A creditor can still pursue debt collecting activity if you fail to abide by the debt settlement agreement
When a debtor fails to abide by the provisions of a debt settlement agreement, the creditor or debt collector may pursue payment. A debtor under a debt settlement agreement can find him or herself in a lawsuit if they fail to pay back their debt. When you sign an agreement you want to make sure that you can pay back the amount you are agreeing to pay back over a certain amount of time. If debtors fail to fulfill the agreement, they may face wage garnishments, liens on their property, foreclosure, and other debt collecting activities. Before you request and establish a debt agreement make sure that it will help your circumstances. Do not try to overextend yourself and make promises that are either difficult or impossible to fulfill.
The good news is that if you are having trouble keeping up with a debt settlement, you are capable of filing a bankruptcy. A bankruptcy may not be your first option, but it will give you another chance at getting back on your feet. If you own property, it is important to understand that you may file a Chapter 13. A Chapter 13 bankruptcy will allow you to keep your property and make payments just like in a debt settlement agreement. To learn about a Chapter 13, you are encouraged to speak with a bankruptcy attorney.
You will usually be required to pay a lump sum payment
One of the biggest downsides to a debt settlement program is that you will usually be required to pay a “lump sum”. In most cases, the debtor will be required to pay upfront a portion of the debt. For instance, if you are behind on payments, you may be required to pay back the debt that has accumulated in the months that you were not able to make payments. If your creditor requires that you make a lump sum payment, you will have to either budget or save as much as you can before you engage with a debt settlement program. A lump sum payment is also something that you may be able to negotiate. Though you may not be able to start a debt settlement program without paying a lump sum, you may negotiate the amount. Make sure that your attorney is aware of the amount you are able to pay upfront before you engage with a debt settlement program. An experienced attorney will be capable of reducing the amount of money your creditors are requesting upfront.
Why would a creditor agree to a debt settlement?
It seems odd that a creditor would agree to a debt settlement program. A debt settlement program will usually result in the debtor paying less than they initially owed. Why would a creditor be ok with that? A creditor knows that a person that is falling behind on payments is facing some form of financial stress. They know that if the debtor defaults to a bankruptcy, especially a Chapter 7 bankruptcy, they will usually receive little to no money. In other words, a creditor would rather receive some form of payment than no payment as a result of a bankruptcy. In addition, creditors are ready to handle debt settlement programs. In fact, many creditors will contact their debtors to see if they qualify for a debt settlement program.
Individuals who are behind on their mortgage or vehicle payments may request to work through a debt settlement program. Upon reaching a debt settlement program, debtors may no longer have to file a bankruptcy and may help prevent foreclosure. A debt settlement can help you deal with loan modifications, credit disputes, and liens.
How can a debt settlement help with a lien on my property?
If you have a lien on your property then you understand that if you sell the property, you will have to pay back the amount of the lien to your creditor. A lien helps a creditor establish rights over your property such as your home. Homeowners that are not looking to sell their property may either pay off the liens or may negotiate with their debts about removing the liens. A debt settlement can help establish a repayment agreement between debtor and creditor so that a lien may be removed.
Debtors that are facing harsh economic times should know that there are multiple ways to deal with debt. If you are considering a debt negotiation or a bankruptcy, you may contact the Bankruptcy Attorney at 424-285-5525. We are ready to provide guidance and representation.