Understanding the Process and Qualifiers for Debt Settlement
When it comes to the financial challenges that Americans face, nothing is more prevalent than debt. The most common forms of debt include home mortgages, auto loans, medical debt, student loan debt – and last but not least – credit card debt. At the end of 2020, it is estimated that consumer debt exceeded $14 trillion. From a financial perspective, biting off more than we can chew is a commonality in this country.
While some of us are able to keep our heads above water and eventually whittle down our debt, others are not so lucky. With high interest rates, a fluctuating economy, and the current job market being unfavorable in certain sectors, debt has a way of eating up the majority of the monthly budget. In some cases, the obligations of monthly debt may exceed the amount of money that you’re bringing in, causing you to default on your credit card bills. If this sounds like you, then you may be a candidate for debt settlement.
What is Debt Settlement?
Debt settlement is the process of individually negotiating with your creditors to settle the amount of debt that you have for a lower amount. For example, if you owed $10,000 to a credit card company, you could negotiate down to $6,000 through the process of debt settlement. It’s the ideal avenue to take for someone who is struggling with debt and has a significant amount of property (known as non-exempt assets) that would not be protected during a standard bankruptcy.
You can think of that settlement as a compromise between two parties. Although the creditor won’t get the full amount that they’re owed, they will at least get a large fraction of it. In the eyes of the credit card companies, it’s better to get a fraction of something as opposed to nothing at all. However, not everybody is eligible for debt settlement. There are a couple of specific conditions that must be met.
The Conditions of Debt Settlement
If you are paying your bills on time every month, then you do not pose any financial risk in the eyes of your creditors. It’s only when you start to make late payments or completely default on your obligations that your creditors see you as a risk. That is the first condition of being eligible for debt settlement. You have to look like a risk, which typically means not making payments on your credit card bills for several months in a row. It’s only at that point will your creditors be interested in cutting any sort of deal with you. To reiterate, getting something is better than nothing. They’ll only be interested in settling if you’re not paying them.
The second condition for debt settlement is that you must possess enough cash to pay off the settlement amount. For instance, if you negotiate your $10,000 credit card balance down to $5000, the deal is going to be predicated on you paying the $5,000 off immediately. The credit card company has no interest in exchanging a promise to pay for another promise to pay at a reduced amount. That doesn’t benefit them at all. The deal is only advantageous to them if they can get a large sum of money right away.
If you meet both of these conditions then you are likely a candidate for debt settlement and should move ahead with securing a debt settlement attorney.
Why is a Debt Settlement Attorney Needed?
Although it may be tempting to pick up the phone yourself and try to negotiate with your creditors, that’s not how the process works. A debt settlement attorney is experienced in these matters and possesses the legal acumen to negotiate on your behalf. Additionally, they are going to be well-versed in which types of debts can be settled and the pay-off amount that they can push for with creditors. A lot of time and energy needs to be devoted to the debt settlement process, which is why hiring an attorney is a worthwhile investment.
It’s also worth pointing out that you run the risk of being sued when your payments are in default. Hiring a debt settlement attorney to help you navigate these financial waters can help you avoid that. The last thing that you want is for a creditor to get a judgment on you which could lead to your wages being garnished, or worse, a lien being put on your home.
Get in Touch with a Debt Settlement Attorney Today
If you are currently in default on your credit card bills or medical debt then you may be a candidate for debt settlement. The best way to see what your options are it’s by contacting a debt settlement attorney. Most of them will offer a free consultation that consists of evaluating your situation and providing you with some options. If you’re not a candidate for debt settlement, you may consider filing for bankruptcy. You can hash out those details during your consultation call.
There’s no reason to drown in debt any longer. Contact your local debt settlement attorney today and take the first step towards financial recovery.