Is Debt Negotiation for You? – Debt Settlement Advice
Debt negotiation is a relatively new form of debt relief that is gaining popularity for its results in reducing credit card and consumer debt and because the process can also help homeowners avoid foreclosure by making home loan modifications more likely to be approved. There are two schools of thought on the subject; one that focuses on broken settlements, credit scores and direct negotiations while the other centers on the short and long term benefits of the practice. First, the arguments against debt negotiations:
* Broken settlements – A settlement can be broken by either the party executing the negotiation or the customer. True, there have been instances were companies didn’t follow through on their promises to see the negotiation from beginning to end. The percentage of customers involved in those situations has been small and could have been prevented with some due diligence. Many companies have been drawn into the debt relief industry by the sheer numbers of borrowers and their escalating debt starting in the late 90′s. What had started as debt counseling run by a few non-profits mushroomed into an industry populated with thousands of new and inexperienced companies offering services far beyond the scope of the original mandate of assisting indebted customers with their debts Within those thousands of companies were those that didn’t deliver on debt negotiations, counseling, or consolidation. Customers can also break a settlement by not making enough payments to settle the negotiation. Whether by circumstance or intention, some will stop making payments during the 18 to 48 months of the settlement process.
* Credit scores – A debt negotiation will likely decrease the credit score of a borrower that enters a debt negotiation, but it depends on what that score is at the time the process starts. A vast majority of borrowers that start a debt negotiation are already behind on payments and are consequently taking hits on credit scores so the negotiation won’t have as much of an effect. The second issue on credit scores is that the negotiation stays on the report for up to seven years. While that can be true, doing nothing will leave charge-offs and open balances on the report indefinitely. Finalized, settled, and closed accounts are ultimately a much better reflection on a credit report than accounts that appear intended and/or neglected.
* Direct negotiation – Borrowers can initiate direct negotiations and, in fact, may be contacted by their lenders to do so. One problem with going direct is that there are normally several accounts to be negotiated, all of which will need to be done independently. A second issue is that the offers in direct negotiations are usually for lump sums or for payoffs within a few months of agreement. Those types of payments are often unworkable for the borrower, especially if there is more than one lump sum agreement at a time.
The benefits of debt negotiations are as follows:
* Immediate relief – Upon initiation of the debt negotiation, the borrower will immediately experience an approximate reduction of 50% on payment obligations for all accounts involved in the negotiation. Reductions can vary, depending on the borrower’s ability to pay. By making payments in excess of the 50% reduction the borrower may be able to pay off the negotiated balances faster.
* Debt balances cut by 40 to 60% – Depending on the creditor, balances can be negotiated down by 60% or more. For a negotiation covering multiple accounts the average reduction for the total is 50%. Once the negotiated balances have been settled the accounts are considered to be paid in full with no further obligation by the borrower to the lender.
* A wide spectrum of accounts which can be negotiated – A debt negotiation can include credit cards, signature loans, department store debt, unpaid medical bills, unpaid utility bills, and more. This effectively gives the borrower a chance to wipe the slate clean without the disadvantages of filing bankruptcy.
* Paying off all debts within four years – As credit card balances have accumulated for consumers over time, making payments that materially reduce the principle balance has become difficult, if not impossible. For those that can only afford to make minimum payments, a full payoff could take twenty five years or more. Calculated out over that time a borrower would pay many times the actual balance in interest alone. Contrast that scenario with a full payoff of debts over four years or less at approximately half the balance amount and the merits of debt negotiation become very apparent.
* Increased odds of approval for home loan modifications – A debt settlement can enhance an application for a home loan modification by showing a reduction of consumer debt payments which allows for a greater availability of a homeowner’s income toward mortgage payments. In fact, a debt negotiation could be the difference between a successful loan modification and foreclosure.
You will continue to hear pro and con arguments regarding debt negotiations. One thing to keep in mind is that credit counselors have been and still are backed by credit card issuers. When listening or hearing about debt negotiations, always consider the source. If you are contemplating a debt negotiation, be sure to conduct some due diligence before selecting a firm to act on your behalf. Visit the firm and ask enough questions to get comfortable with the partnership. Insist on a law firm experienced in debt negotiations and, if applicable, home loan modifications. Getting back on your feet will take partnering with the right firm and a commitment to seeing the process through to its completion. Take care of those issues, and you’re on your way to financial freedom.
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Help answer the question
How does a bankruptcy in Ireland affect debts created in the United States?
Some types of debts are not dischargeable in the US such as student loan debts. Some are easily discharged such as credit card debt. How does a bankruptcy in the Rep of Ireland affect foreign debts?
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This entry was posted on Saturday, August 1st, 2009 at 4:23 am and is filed under Debt. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
August 1st, 2009 at 5:22 am
Nope. Send them back with a copy of the death certificate but do not put your name and address on the letter!
August 1st, 2009 at 5:32 am
I love this guy! Just what we need to blow away the Feb induced lies and cover-up. Wake up America – your dollar is being destroyed every time your government bails out the Wall Street robber barons. If you want to protect your family and loved ones, get precious metals NOW.
August 1st, 2009 at 5:47 am
I wouldn't use any of them they are rip off artists. They take your money and do nothing, been there done that. Go to Consumer Counseling, in every city or county, it is free, non profit and they don't charge but they will contact all the places you owe money to and get you with lower payments and great ways of getting out of debt !! They are well known by all companies and acknowledge Consumer Credit Counseling as serious and good to work with .
August 1st, 2009 at 5:56 am
black obama knows nothing about economics and monetary policy. even he has a B.S. from columbia in political science, he knows nothing on how to save a nation. how to use gold as money and pay off the debts, etc.
August 1st, 2009 at 9:39 am
I have a hard time believing that a country like China just won’t say Fuck You America. Because they keep financing us means that there is an angle in it. What is the obvious thing not seen for the motive?Theu can’t believe we can or will pay back. The foreclosed properties aren’t worth the bill. So what does the invisibe promissory note say?Is that what the Fed can’t show? Will we be slaves for china manufacturing industry on American soil?I mean the ones that aren’t killed by the flu?
August 2nd, 2009 at 1:49 am
If you are able to settle the debt, settle it….Bankruptcy as the last post stated stays on your credit report for 10 years…the debts stay for 7 years, and will show as included in the bankruptcy. If you decide to pay them off, make sure you request a pay to delete so they take them off your credit report. To settle would be easier if you have the available money to do so. In the future when trying to finance anything new, they will look at your current payment and not necessarily the old debts. Chapter 7………no it's no easier, it's easy to pay an attorney, it's easy to file, take the credit counseling and wait to have it discharge…It's hard to re-establish credit, harder to buy things in the future, and harder to find jobs if the check your credit report for employment. There is nothing easy about filing a bankruptcy. If you do file, learn from it and re-build and try not to do it again..there is life after it, but, it's a tough road to climb! Good Luck!
August 2nd, 2009 at 5:35 pm
NO EFFECT AT ALL BOTH DIFFERENT COUNTRIES WITH NO CONNECTIONS IN THIS TYPE OF THING AT ALL
NO COUNTRY CAN IMPOSE ANY LAW IN ANOTHER COUNTRY
IF YOU BANKRUPT IN ONE COUNTRY YOU WILL STILL OWE MONEY IN THE OTHER
August 2nd, 2009 at 6:06 pm
>Does that mean it’s on it’s way to 5-6 k like schiff says?
Eventually, of course.
Over time, currency always inflates. In the last 80 years, the dollar has lost 95% of its value. With our current monetary policy, it could lose 95% of what’s left within the next 20 or even 10 years.
August 2nd, 2009 at 6:13 pm
I assume your talking about credit cards. If the original creditor or the collection company they either hire or sell your account to takes you to court and gets a judgment they can attach bank accounts, garnish wages (if your State allows it) and file liens on any real property you may own like cars, boats, land and homes.
They can not take the property but neither can you sell it without paying the lien.
August 2nd, 2009 at 11:33 pm
I think it is pretty obvious that US isn’t shit as an economic powerhouse any more. How can the dollar not fail is more like a realistic question.Who goes down w/that fall? All local regions that grow food and have water and also some manufacturing will be okay locally. You guys that think storing up some food and water are going to be cool? For how long?Until food and water run out . That’s it.Try to trade some gold for other commodity and get ripped off or followed home. We’re NWO fucked.
August 3rd, 2009 at 12:36 am
Ask lenders for agreement to delete this items from your credit report when paying them. I recommend to get such agreement thru credit repair agency, for example this one – credit-report-free.totalh.com
August 3rd, 2009 at 8:59 am
Things may have changed, but unless a collector has a court judgement against you they can not on thier own take money out of your account without your approval. One major exception to this is the federal government. So, unless your debt is with the government, and you do not have a judgement against you, then they can not touch it.
August 3rd, 2009 at 9:20 am
yes, they will.
August 3rd, 2009 at 5:45 pm
Check out Gerald Celente too!
August 3rd, 2009 at 10:39 pm
rrdrums110: USA an economic powerhouse? Lol. It has never been such. What the USA has is a mountain of debts, not an economy. And this is going on since 1913.
August 4th, 2009 at 8:31 am
Now gold finally went over a grand again. Does that mean it’s on it’s way to 5-6 k like schiff says? Peter and celente disappointed me when the dollar didn’t crash in March and the food riots seem to be a fantasy. i want the sytem to crash once and for all so we can build it up the right way. all we’re still doing is fucking around procrastinating the end.I’d rather die swiftly than this slow b/s everything is rosy still hype. Can’t believe Berjewnke says the recession is over.Wait yes I can.
August 4th, 2009 at 10:07 am
MrAlanKendall — Yes , you will make a lot of money , when Hyperinflation hits ,
But , This money will not buy you anything , YOU DO not understand what is hyperinflation ,,,
MAIN reason for desintegratioon of CCCP and Yugoslavia in 1990 and 1992 , was HYPERINFLATION , I can not imagine what will happen in USA , CIVIL war all over AGAIN.
August 4th, 2009 at 11:37 am
Your bills pile up high.