If you are looking for the least costly way to resolve your financial issues, debt negotiation is something you should consider. Many people continue to live with growing debt and abusive calls from collectors because they don't know that it may be possible to receive forgiveness on a large portion of what they owe. Debt settlement refers to the practice of paying your creditor a lump sum of money at once, or over a series of installments. In exchange, the creditor agrees to consider the debt resolved.What Is a Debt Negotiation Plan? A debt negotiation plan is an agreement between you and your creditor that sets the terms of a debt settlement offer. These plans specify an amount of money that is to be paid to the creditor, either all at once or over a reasonable length of time. The total amount to be paid is usually around half of the initial balance. The plan also specifies the percentage of the debt that the collector must legally forgive once the lump sum has been received.
Understanding Debt Settlement
Many people do not know that negotiating debt is an option because creditors tend to be hush-hush about it. However, it is a legitimate method that has the potential to save you money on your debt and end the cycle of collector harassment. A debt settlement lawyer can help you understand the process and make sure you go about it in a legal way that protects your best interests.
How Can This Arrangement Benefit All Parties?
It may seem surprising that creditors are sometimes willing to settle debts for less than what they are owed. However, they understand that for many people, the alternative is Chapter 7 bankruptcy. Bankruptcy involves the liquidation of some of the debtor's assets for the purpose of paying the debt. Depending on the value of the assets, the creditor might not receive as much as they would through debt settlement.A skilled lawyer can work towards negotiating a plan that works for both you and your creditors. Such a plan will involve a sum of money that is manageable for you and greater than the amount the creditor might otherwise receive.
What Percentage of the Debt Is Usually Forgiven?
Debt settlement offers are negotiated on a case-by-case basis and can range widely in the percentage of the total debt they accept. The average debt settlement offer in the United States is around 50%. Individuals seeking debt settlement are often advised to initiate the conversation by offering their creditor 30%, to which the creditor usually responds with a counter-offer of 50%.
What If Your Creditor Wants More Than 50%?
Most people who are struggling with debt have several accounts that need to be paid. When you have a finite amount of money available for a lump payment, it is important to direct that money towards the creditors who offer you the most competitive offers. You are under no legal obligation to accept a settlement offer that is not in your best interest. If the amount is too low, it might be better to put the lump sum towards a different creditor instead.
Under What Circumstances Does Debt Settlement Work?
The key question to ask is whether or not a portion of your debt is in the form of unsecured loans. An unsecured loan lacks collateral, making creditors more willing to negotiate. Types of unsecured loans that often make good candidates for debt settlement include:
- Medical bills
- Credit card balances
- Student loans (excluding federal programs)
- Some types of personal loans
- Gas station cards
- Retail accounts
- Cell phone bills from closed accounts
- Utility bills from closed accounts
- Mortgage short payments
- Car repossessions
How Much Money Will You Need to Settle Your Debt?
The amount of money you need to come up with to pursue debt settlement depends on the total amount you owe and the percentage your creditor agrees to forgive. Facing a large amount of debt can be intimidating, leading many people to believe that they would need an unattainable amount of money to erase it. However, given the large percentage creditors often agree to forgive, your lump payment might be smaller than you think.If you are unable to come up with the total lump sum all at once, it might be possible to do a series of payments spaced out over time. Your lawyer can help negotiate these terms with your creditors. For unsecured loans or creditors who do not offer debt settlement, he or she can advise you on other options, such as a repayment plan or debt consolidation. If it is not possible to come up with a lump sum for debt settlement, your lawyer can help you pursue these types of alternatives or explore other solutions.
Why Should You Work With a Debt Settlement Attorney?
As the term implies, debt negotiation plans involve a certain degree of bargaining between the parties involved. The more skilled the negotiator, the better your chances of securing a settlement offer that is reasonable. Experienced debt settlement attorneys can put their law school degrees to work for you, drawing on previous cases that have built their familiarity with creditors.
Legal Advice You Can Count On
Personal finance is complex, and many people have a mix of secured loans, unsecured loans, and other forms of debt. Your lawyer can help you address each loan in the way that benefits you most, helping you come up with a comprehensive plan to become debt-free. If contingencies such as new debts or major financial losses occur along the way, your lawyer can advise you on how to navigate through these difficulties.
Tools That Make the Settlement Process Work for You
People who negotiate with major creditors run the risk of becoming victims of intimidation tactics and manipulative policies. For example, it is possible that a creditor could agree to accept a lump payment verbally and provide you with instructions on how to send it. If the proper legal documentation of this arrangement does not occur, they might try to accept the payment without forgiving the rest of the debt.Having a knowledgeable lawyer on your side is the best way to ensure that your negotiation follows legal protocols that hold creditors responsible for honoring their side of the bargain. Your lawyer can also keep you informed about the deadlines and paperwork you need to understand in order to fulfill your obligations without incurring further penalties.
Major credit card companies and other big lenders have many resources at their disposal. When you are in debt, it can be difficult to face them and their collections agencies. An experienced attorney with a robust knowledge of bankruptcy law is your best asset when dealing with them. Your lawyer should be familiar with the Fair Debt Collections Practice Act and other legislation designed to protect you.
Talk to a Lawyer About Creating a Debt Settlement Plan
No matter how serious your debt issues are, having a consultation with a debt settlement lawyer can clarify the path forward. Resolving debt is a process that involves strategy, dedication, and knowledge of the legal system. Our team is here to support you through this process. If you are ready to take the first step towards financial freedom, contact Thomas K McKnight Law firm.