Get out of debt fast


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Providing sound debt advice for all those experiencing tight money flow this time of year

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Get out of debt fast

  1. 1. ==== ====Hello, if you would like more help with your debt please visit the link ====Under a debt settlement arrangement your creditor agrees to accept a lump sum payment of lessthan your accounts balance to resolve fully your debt. If you have a bundle of cash, debtsettlement is a legitimate option for taking care of high-interest, unsecured debts.But dont hire anyone or any company to settle your debts. You can effectively settle debtsyourself. Debt settlement company fees are high and generally non-refundable. If a settlementcompany can persuade one of your creditors to take less than the full balance to resolve a debt,then so can you.What Debt Settlement Companies DoA debt settlement company claims it will, for a fee, persuade your creditors to take as little as halfof what you owe to resolve your debt. Sounds good! Since you probably dont have a bunch ofcash laying around, youll pay the debt settlement company a series of monthly payments. First,know that typically your payments go 100% toward the settlement companys fee until the fee ispaid. Only after the fee is paid do you start building a settlement fund. When youve built upenough in your debt settlement account, the company will try to settle one of your debts.Heres the CatchYour creditors have agreed to nothing. During the many months you are making payments to thedebt settlement company, the creditors youve been told will settle are starting or continuingaggressive collection activity. You get phone calls and letters and worse, and you could be suedand face garnishment while the debt settlement company is holding your money. Telling creditorsthat youve signed up for a plan with Settlements-R-Us, Inc. and are making monthly paymentswill carry no sway whatsoever with your creditors. They wont care. To avoid garnishment, youcould be forced into bankruptcy. You can get back from the debt settlement company the money inyour account, but the fee youve paid is probably gone forever, even if the company didnt settle asingle debt for you.The moral of this story? Never consider signing up with a debt settlement company unless you getfrom each creditor involved a document, on the creditors letterhead, that states the creditor willaccept a specific dollar amount on a specific date in the future to totally resolve your debt, AND, inthe meantime, the creditor wont pursue collection of the debt.If you do have a lump of spare cash, you should consider doing your own settlement, along withother options, to pay off unsecured debts. Keep the following in mind:You need an Emergency Savings fund. Dont use every spare penny you can scrape together tosettle a debt and leave yourself vulnerable.
  2. 2. Its a poor idea to withdraw money early from a retirement account to pay toward debt.If you settle a debt, the creditor will probably report the amount "forgiven" to the IRS. The IRSconsiders forgiven debt to be part of your income, and you likely will owe income tax on it on April15th of the next year. Your debt settlement strategy must include a plan for having the cash to paythe tax on the forgiven debt. You dont want to come out of a debt settlement with new IRS debt.Because you would be repaying less than the full amount due, debt settlement has a much worseimpact on your credit score than any method that would result in full repayment of the debt, like aDebt Management Plan. After a debt settlement is done, your credit report should show the settleddebt balance as $0, but may also show a notation-the exact wording is negotiable-to the effect of"less than full balance paid." This notation may stay on your credit report for up to seven yearsafter settlement.With Those Cautions in Mind, Heres How to Settle a DebtUnderstand the source of your power in the settlement negotiation: You may not pay the debt atall. Before any creditor will agree to settle a debt, it must be convinced it will be better offaccepting 40% or 50% of the total balance today instead of trying to collect 100% of the debt overmany future months or years. This means few creditors will negotiate a debt settlement until theaccount is seriously past due and successful collection is clearly, from the creditors point of view,in doubt.If you reach a settlement agreement, the creditor will want the payment in a lump sum right away.Dont start settlement negotiations until you have in hand the cash youve decided you can sparefor debt settlement.Write a letter to the creditor proposing a specific settlement. You can find many example debtsettlement letters on the Internet by searching "debt settlement example letter." Photocopy foryour records this and all correspondence with the creditor. Send all creditor correspondence bycertified postal mail, delivery receipt requested. E-mail is not acceptable.What dollar amount should you propose as a settlement? There is no pat answer to this questionbecause it depends on the situation. The more severely delinquent the debt, the less the creditoris apt to settle for. The lower the creditor judges the odds of collecting the debt in full, the less thecreditor is apt to settle for. If youve missed two payments on a credit card debt, the credit cardcompany is unlikely even to engage in settlement negotiations, period. But if you stopped payingon a credit card debt two years ago and the credit card company has charged off the debt andsold it to a collection agency, and youve paid the collection agency nothing and ignored theircollection letters and calls, and your credit score is in the dumps, you may find the collectionagency willing to agree to a settlement very favorable to you. Most settlements end up at 40%-60% of the original balance. As with any negotiation, youll want to leave room to improve youroffer, so in most cases its probably smart to offer less than 40% of the balance.Say youve decided you have $3,000 of spare cash you can devote to settling a $6,000 debt. Startnegotiations by offering less than $3,000, perhaps $1,500 or $2,000. If the creditor counters youroffer with $4,000, you can, if you choose, improve your offer to $2,500 or $3,000, but dont offer oragree to a settlement over the $3,000 youve decided you can spare. If the creditor wont budge,politely end the negotiation by inviting the creditor to re-contact you by letter if it reconsiders.If a creditor answers your offer letter by telephone, make detailed notes of any proposals made inthe phone call and include in your notes the date, time, and callers name and employee IDnumber. Agree to nothing on the telephone. Even if a verbal counter offer is acceptable to you, tellthe caller you need the offer in writing before you will agree to it. If the creditor refuses to make theoffer in writing, tell the caller you will not agree to any settlement thats not documented in writing,
  3. 3. and politely end the call with an invitation to the creditor to re-open negotiations with a letterspecifying all terms of its settlement offer.Do not agree to any settlement offer unless its in writing and 1) names the dollar amount agreedto; 2) names the date by which the settlement amount must be received by the creditor; 3) statesthat the creditor agrees that this dollar amount will fully resolve the debt and it will not pursuefurther collection; 4) states the creditor agrees to report the account balance as $0 to all creditbureaus that include the debt on your credit report; 5) includes the exact wording of the notation, ifany, that the creditor intends to send to the credit bureaus indicating less than full repayment.Once you have in hand a written settlement agreement acceptable to you, make the settlementpayment promptly, by cashiers check or money order and keep the receipt that accompanies thecheck or money order. Send the payment by certified mail, and be sure to get a receipt from thepostal service indicating the date of delivery to the creditor. Dont cut it close-mail your payment atleast 15 days prior to the due date in your settlement agreement.Follow-up: Get every four months your free annual credit report from one of the three reportingbureaus. Examine closely each of the three free credit reports youll get over the next year. If thesettled debt still appears, the balance should be $0. If the creditor agreed to specific wording forany notation that appears with the debt record, you should see only that wording.If the creditor fails to live up to the written settlement agreement, dont waste your time contactingthe creditor. Instead immediately pursue resolution by following the Federal Trade Commissionsprocedures for disputing information on your credit report. Your evidence is the written settlementagreement from the creditor, your cashiers check or money order receipt, and the postal servicereceipt showing the date the payment was delivered to the creditor.Finally, nothing above is legal advice. Consult an attorney to assure a legally binding, watertightsettlement agreement with a creditor.Kurt Fischer is a certified credit counselor and founder of http://www.MyMoneyCounselor.comArticle Source: ====Hello, if you would like more help with your debt please visit the link ====