9 Questions To Ask Yourself Before Persuing Debt Settlement

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9 Questions To Ask Yourself Before Persuing Debt Settlement

  1. 1. ==== ====Are you deeply in debt with high interest rates or cant make your mortgage payments? Pleaseclick below for helpwww.dynamicsolutionsintl.com/ohall==== ====Its no secret that Americans are struggling financially. Massive layoffs, inflation, unaffordablehealthcare, skyrocketing gas prices and hiked-up interest rates on credit card accounts areplunging millions of consumers to the brink of bankruptcy. However, many of the would-bebankrupt are turning to a less drastic solution to their debt problems: debt settlement.A Super-Short History of Debt SettlementDebt settlement is nothing new. Its simply an agreement between two parties to settle a debt forless than the outstanding balance. Lenders have been doing this for hundreds of years, but themodern American banking industry started formalizing the practice after many of their customersstarting falling behind in the late 1980s and early 1990s. These banks setup separate departmentswith specially-trained negotiators who contacted delinquent customers and offered them a lowerpay-off amount to fully settle an overdue account.Shortly afterward, entrepreneurs set up companies to help negotiate the best possible terms forfinancially distressed consumers trying to settle their debts. This marked the birth of the moderndebt settlement industry. Thousands upon thousands of consumers flocked to debt settlementwebsites seeking more information and enrollment into a debt settlement program and debtsettlements popularity as a bankruptcy alternative continues to grow.Theres good reason for debt settlements popularity. For some, it can be the fastest and leastexpensive form of debt relief besides bankruptcy. According to most debt settlement company andinformation websites, a consumer may be able to settle all settlement-eligible debts for less thanthe full outstanding balance in less than three years.Is Debt Settlement Right For You?If you are struggling with your finances and looking down the cold barrel of bankruptcy, you shouldinvestigate debt settlement. However, debt settlement is not for everyone. So, you should try tofully understand how it works as well as the benefits and drawbacks of this debt relief optionbefore enrolling into a debt settlement program or attempting to negotiate your own settlements.Here are some questions to ask yourself to help you gain this understanding.1. Can I repay my debts?If you can repay all of your debts in full, then you should. Debt settlement is only meant for peoplewho are financially unable to fully repay their debts but who might be able to repay debts if theoutstanding balances are reduced.
  2. 2. 2. Am I experiencing a financial difficulty?Not wanting to repay your debts is not a good reason to enter into debt negotiations and creditorsoften take financial hardships into consideration during negotiations. These hardships can includeunemployment, loss of income, unexpected medical bills, illness or death in the family and divorce.3. What kind of debts do I need to settle?Debt settlement only works for unsecured debt, such as credit card accounts, medical debts andmaybe some department store cards and other personal debts. Lenders historically do notnegotiate or settle secured debts, such as home loans, automobile loans, student loans and otherloans secured with collateral.4. Can I save up and set aside some money each month?While unable to fully repay your debts, you should be financially able to at least pay back a portionof your debts if you can save up and set aside some money each month. This amount should beless than the minimum monthly payments required by your creditors (if you can comfortable payyour minimum monthly payments, then debt settlement may not be right for you). However, evensaving up and consistently setting aside this smaller amount each month will add up to a sum thatyou may be able to offer as a compromised payoff to settle a debt. It may take months, but if youare consistent and patient the funds will build up.5. Can you function with a budget?Being able to save up and set aside funds to pay off settlements will require you to operate withina tight budget. If you are not financially disciplined, then you should start learning how to be.Pursuing debt settlement is an honorable way to resolve a tough financial situation, but it doesrequire discipline -- and this means budgeting.6. How much do I care about credit?The debt settlement process can be damaging to your credit. This is because the process resultsin missed payments and accounts often go into charge-off before being settled. If you prize yourcredit score more than being debt-free, then you should consider getting a second or third job soyou can fully repay all your debts and skip the debt settlement option (assuming you can keep thisup for several years until all your debts are paid). Otherwise, be aware that negative marks canremain on your credit report for up to seven years (except for bankruptcy, which can stay on yourcredit report for up to ten years). However, as the negative mark gets older, it has less impact onyour credit score.7. Do I want to avoid bankruptcy?Debt settlement is really about helping you repay your debts based on your limited financial abilityand keeping you out of bankruptcy, assuming you want to avoid bankruptcy. This is important,because some people dont mind the 10-year stain on their credit or the fact that they wont beable to file Chapter 7 bankruptcy again for another eight years. Some people may not have a
  3. 3. house they are trying desperately to save or dont have to deal with the new provisions of thebankruptcy law that are designed to keep some people from filing bankruptcy. However, if thethought of filing bankruptcy doesnt sit well with you and you are struggling to get by, then debtsettlement might be just what you need.8. Can I separate myself emotionally from my debts?If you pursue debt settlement, your creditors are not going to be happy with you because theywant you to pay all of your debt, plus interest, plus fees and plus whatever other finance chargesthey can dream up. You might end up getting calls from debt collectors and some debt collectorscan be downright nasty. They often use guilt to get consumer to pay debts, even if that consumersdoesnt owe the debt or if the consumer doesnt have the ability to pay. So, consumers pursuingdebt settlement need to disassociate themselves emotionally from their debts, read up on the FairDebt Collection Practices Act (FDCPA) and be vigilant about their goal to be debt-free.9. Can I be patient?We live in a culture of instant gratification. We expect our food to be prepared before we put thelids on our fountain drinks. Our mail has to absolutely be there overnight and we want our pizza in30 minutes or less. Debt settlement doesnt work this way. It will most likely take several monthsbefore you save up and set aside enough funds to start offering settlements to a creditor and itmay take weeks or even months of negotiations before a creditor agrees.If you pursue debt settlement, you have options. There are many debt settlement companies tochoose from and even law firms that will negotiate your debt settlements for you. However, youshould definitely investigate any company you consider, whether or not they are a professionalservice company or a law firm. These companies will charge you a fee for their services, so besure to compare how they charge to make sure you are getting the best deal. Also check with theBetter Business Bureau to see how each company handles complaints. You should also only dealwith companies associated with industry organizations, such as The Association of SettlementCompanies (TASC) and US Organizations for Bankruptcy Alternatives (USOBA).Of course, you can always negotiate debt settlements on your own. All you need is the rightinformation and there are kits you can purchase to guide you through the process. Just do asearch for "diy debt settlement kit" or "do-it-yourself debt settlement kit" and you should find anaffordable kit that will show you how to settle your own debts without spending hundreds orthousands of dollars in professional debt settlement service fees.Ultimately, how you resolve your debt issues is up to you. If you are in debt up to your eyeballsand struggling to make ends meet, then you should do something. Debt doesnt sit; it grows withinterest and fees and every dollar you owe in interest is a dollar you dont have to pay towardsrent, mortgage, food, education or family vacations. For your own personal and financial wellbeing,theres nothing like being debt-free.John Janney is the president of the National Financial Awareness Network, a personal financepublishing company and author of "How To Get Great Credit!" NFAN offers educational products
  4. 4. and services such as the popular Do-It-Yourself Debt Settlement Kit athttp://www.diydebtsettlementkit.com/ and http://www.HelpForDebtors.com/Article Source:http://EzineArticles.com/?expert=John_Janney==== ====Are you deeply in debt with high interest rates or cant make your mortgage payments? Pleaseclick below for helpwww.dynamicsolutionsintl.com/ohall==== ====

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