Debt settlement is a method by which a third party negotiations on behalf of the consumer with their lenders to reduce their outstanding balances. Typically, this program works only for unsecured credit cards but may include any other types of unsecured debt like medical bills.

It is the consumers responsible to ask questions and do their research on the debt settlement company they select.

With any program, there are pros and cons when considering a course of action. Some of the pro’s are:

• One single monthly payment
• Avoiding bankruptcy as an option. Always consult with an attorney about this step.
• Stopping collection calls
• Possible elimination of lawsuits and other legal action
• Stop any extra charges to the credit card

The con’s are:

• Credit score will drop
• Tax ramifications – consumer will need to report any amount of forgiven debt that exceeds $600. This means an increase to your tax bill.

So call your debt settlement expert today to fully discuss how they can help you and your family.

This all changed over the past several years. Consumer’s started facing financial hardships, lost of job, reduced salaries, and divorce or faced a medical emergency along with the adjusted interest rate on their mortgages and increased unsecured credit card debt.

The consumer was faced with the reality of how to get out of debt. In most cases, this is the first time many consumers were faced with these uncertain financial times. So the consumer started looking for ways to payoff their financial obligations.

One of the options the consumer is selecting is a debt settlement program. Debt settlement is a method by which a third party negotiates with the lenders to reduce your obligation by up to 50% of the outstanding debt. The consumer puts aside a set amount of monies each month into a “trust/escrow” account over a period of 12 to 48 months depending upon the amount of their credit card debt. The debt settlement company starts to negotiate when at least half of the lowest balance is in the account. This proceed is repeated until all debts are settled.

This is not an easy or quick fix program for the consumer. However the amount of monies placed into the trust/escrow” account is normally less than the combined monthly minimum payments. By entering into this program, it will show the lender you want to repay your obligations but need help because of the consumer’s most recent financial hardship. The majority of lenders are willing to accept a settlement of half because if the consumer files bankruptcy the odds are the lenders will receive nothing. By receiving nothing this affects the lenders bottom line and is reflects as loan losses on their financial statements. So call your debt settlement expert to day to discuss.

The majority of consumers want to pay off their obligations however they are at a stand still and not sure where to turn. The consumer is on an emotional roller coaster and is seeking ways to make ends meet.

One option is a debt settlement company. A debt settlement company is a third party which will negotiate with the lenders on behalf of the consumer. In most cases, a debt settlement company is able to reduce the consumer’s outstanding balances by up to 40% to 50%. So considering that a consumer may have more than $10,000 in unsecured credit cards this debt might be cut in half. The savings to the consumer is monthly interest on their cards and the debt reduced from $10,000 to $5,000.

Using a debt settlement program is not a quick fix or an overnight solution to the consumer’s situation. However, it allows the consumer to save monies into a “trust/escrow” account over a period of time. Normally, this amount is less than what their combined monthly minimum payments are on the debt. The debt settlement company begins negotiation with the lender when at least half the monies are saved against the lowest outstanding debt. An example is if you owe $30,000 on five credit cards and the lowest balance is $5,000, when you have approximately $2,500 in the “trust/escrow” account the company will start to settle with the lender.

Therefore, call your debt settlement expert today to discuss how they can help you.

In order to qualify for anytime of credit, you need to have good credit. A good credit score means you are a low risk consumer while a lower credit score means you are a riskier borrower. Credit scores from the three major credit bureau’s (Equifax, Experian or TranUnion) range from 300 to 850.

However, maybe as a consumer you had a fair to good credit score. But do to the recent economic environment you are not able to keep up with your financial obligations. This is going to affect your credit score since late payments, mortgage modifications and high balances are now taking a bigger toll on your scores.

According to a recent article in “USA TODAY”, lenders are clamping down on credit and credit scores are taking a hit. So what does this mean for the consumer? Basically this means that lenders are reviewing all of their consumer credit cards and making determinations about who is using their credit cards. Lenders are closing credit card accounts and lowering credit limits for millions of consumers who have never paid late. When a card is closed by a lender this effects your credit score.

You credit score may had already taken a hit because of your late payments and too much credit with high balances prior to entering into a debt settlement program. So when you are looking at debt settlement program and you are informed that your credit score will take a hit.

So do not let the fear of your credit score dropping from looking at a debt settlement program as an alternative to your financial situation.

One of the alternatives to this situation is to consider a debt settlement company. The consumer is wondering how these companies know of their financial situation. Basically, these companies have established credit parameters with the various credit companies and receiving list of names and addresses such as, debt over $10,000 or high balances whether you are current or not on your payments.

So what should the consumer do about their financial situation? The consumer should ask the debt settlement company the following:

• What are your proven strategies?
• What is your success rate?
• Are you listed with the Better Business Bureau?
• How long have you been in business?

The consumer should be aware that if they try to negotiate with a lender on their own. The lender in some cases will not talk to the consumer unless they are already 60 to 90 days delinquent. If you are already delinquent this is going to hurt your credit score and can not be blamed on a debt settlement company.

One of the key’s in using a debt settlement company is establishing:

• The consumer has some ability to pay a set amount each month
• That the debt settlement program is sound
• That the consumer is aware of all fees involved in a program
• That a debt settlement is better than a charge off on their credit report
• The consumer needs to be upfront with the debt settlement company about their financial situation
• The consumer needs to stay in involved in the process.

The consumer needs to remember it is their responsible. There is no quick fix for solving the consumer’s debt issues. However, there is a way out of this situation. Contact our debt settlement expert today to discuss your options and get started on your pre-approval.

However, it doesn’t take long before your wallet is filled up with bank cards and department store cards. Most people think that it is easy to pay them off at the end of the month. Easier said than done. Many people start to justify reasons to use the cards. It’s easier than to part with cash.

The debt builds up slowly with no major purchases to show for. And before you know it – you can be thousands of dollars in debt with no end in sight. This type of consumer debt is considered unsecured debt verses secured debt. The difference between the two types of debt is at secured debt is backed by some type of collateral with fixed payments to reduce the debt while unsecured has high interest rates, no tax advantages and is not collateralized.

In the beginning, the consumer feels it’s alright about repaying only the monthly minimum payment because they believe the next month they will be able to paid more on their account. This gives the consumer a feeling of confidence to continue to spend more freely and leads them down the path of spending more than they earn each month. However this spiraling debt only continues to grow and the consumer is now facing added pressure to met their financial obligations.

The consumer continues to build up debt because they are paying only the bear bone minimum. The credit card companies only require you to make a minimum monthly payment of between 2 to 3 percent of your balance in order to continue using your card while continuing to add a monthly finance charge to your balance along with late fees and over limit fees in some cases.

Because of this spiraling debt, the consumer needs to consider how to get out of debt. One of the options for the consumer is debt settlement. Debt settlement is a method by which a third party works on the consumer’s behalf to negotiate with the credit card companies. This process requires the consumer to stop using their credit cards, budget their finances and start saving a certain amount of money each month. This money is placed in a “trust” account and until it achieves at least half of your lowest balance credit card before the third party company can start negotiating. This process may take between 12 months to 48 months to clear all of your unsecured debt.

Now is the time to explore how our debt settlement company can help you out of the depths of financial problems.

One scenario however in which someone else could end up with the debt is if you share the account. If a spouse or family member signed the credit card application as a co-signer then that person could be liable for the balance on the card along with the estate. If though, the second cardholder is merely an authorized user – didn’t sign the application, just has charging privileges they are not responsible.

Community property states:
• Alaska
• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

The above states generally are regarded as assets accumulated during a marriage are considered joint property and in some cases so are debts. If you late spouse has a separate account and has a debt it is possible the debt could pass to the spouse. Please keep in mind that all states have variations so you need to ask more questions.

Here is the simple scenario – if the card was yours alone, with no joint account holders the debt is yours alone too. When you die, your estate is responsible for paying off the balance. If your estate goes through probate your executor will take a look at your assets and debts and be guided by the law to determine in what order the bills should be paid. If your estate or assets don’t cover the bills – the credit card companies will be notified and the debt is written off.

Finally, the executor should notify the credit card companies that the account holder has died. You will need to send in a certified copy of the death certificate. Also, keep a copy for your records as proof of what was sent and when.

Even fast food retailers know that consumers will be more likely to spend more on plastic than with cash. Needless to say, they are racing to make it easy that every outlet is now card friendly. The last thing you would want to do is purchase that hamburger on a credit card.

Do not discard the material – if you have questions call your credit card company. You need to be more aware of the rules because your living with them. You need to read those little booklets that often come in the mail.

Finally, if you find yourself in doubt – pay the minimum payment on time. Big payments do not impress lenders: timely payments do. For example – if you make a late payment your lender may waive the late fee however your other credit card company’s can raise the interest rate even if you made no late payments to them. How can they do this? It’s called “universal default”. The basics of universal default are simple – if you’re more than 30 days late on a payment to anyone the interest rate on any card with a universal default clause can increase your interest rate.

Be proactive with your knowledge of the industry so with that being said, don’t wait for something to go wrong and react to a situation .

Well, one more thing about your coffee, no matter where you get it, is that you can make great tasting coffee at home and save yourself a ton of money. Most of us would rather pay for the convenience of having someone else make it for us. Well okay, but that kind of thinking needs to change if you are looking to get out of debt. Sorry! One time, I did a budget for one couple I was working to get a mortgage and discovered that they were spending close to $400 just for coffee (2X a day for each of them and an occasional one for the kids). It was shocking to them that they were spending more on coffee than gasoline. They stopped their buying their coffee out and stared making it at home.

Some other things around the house where you could look: TV and Internet access. I know that I might get some resistance here but you do not need cable TV. That is right. You can put the $69 a month towards paying your debt off. You can get movies for free at the library. My wife and I have found the selection at our public library to be quite good. Now for the Internet, take a look at what service provider you are using. I see tons of people using AOL at $21 a month. The truth is that you can get the same internet service through Net Zero for $9.99 month. Better yet, see if you can tap into your neighbor’s wireless network if it is a non secure network. You might even talk to them about an arrangement where you pay them half their Internet bill for using their network. Sounds brash and radical, but so is getting out of debt in today’s world.

What are you paying for your insurance? Are you paying too much? It makes sense to compare different insurance companies. Insurance premiums can vary hundreds of dollars from company to company. It pays to shop around. Another thing you can do is replace your light bulbs in your home with fluorescent bulbs. Not only do they last a lot longer and are better for the environment, they will save you money. I knocked 25% off my electric bill in my condo by switching to “green” light bulbs.

Get Your Credit Back on Track

Okay, that is enough for things around the house. As you can see, there are plenty of places where you can cut your expenses if you declare “today is the day” to begin your journey out of debt. If your credit is not in the best shape and you have collection accounts, you do not have to pay all of the balance back. If your accounts have been turned over to a collection agency you can negotiate for pennies on the dollar of what you owe. If you do not want to do this yourself, you can hire a debt negotiator. Most settlements come in between 40-60 percent of what you owe. Once the debts are paid off, your score will go up as well. Having your scores go up will do two things. First, it will put you in a position to borrow money at better interest rates and terms (for a home, a car, or with a good credit card). Second, you will most likely think better of yourself and have more confidence in life knowing that your credit is cleaned up and that your scores have gone up. All of this comes from knowing that you did the work to make it happen.

The bottom line about getting out of debt is to live by your needs and not your wants. Do you really need that expensive vacation, jewelry or car? You will have to pay it back with your time. If you are like me I would rather enjoy my life than worrying about how I am going to get out debt.

Written by Debt Free Dave. Debt Free Dave has been in the mortgage and consumer finance business for over 10 years. He has a Finance and Real Estate degree from the University of Arizona. This Article is designed to be of general interest and should not be considered legal advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.

Worrying a about your credit and potential taxes when considering a debt settlement program should be low on your priority list. Your main focus should be to get the debt paid off as fast as possible so you do not have to worry about your bills anymore. Can you see it now – living life debt free?

Debt Free Dave has been in the Mortgage and Consumer Finance industry for nearly 18 years. He has a degree in Finance and Real Estate from the University of Arizona. This Article is designed to be of general interest and should not be considered legal advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.