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

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Hello, if you would like more help with your debt please visit the link below
www.debtsettlementorder.com
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Under a debt settlement arrangement your creditor agrees to accept a lump sum payment of less
than your account's balance to resolve fully your debt. If you have a bundle of cash, debt
settlement is a legitimate option for taking care of high-interest, unsecured debts.
But don't hire anyone or any company to settle your debts. You can effectively settle debts
yourself. Debt settlement company fees are high and generally non-refundable. If a settlement
company 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 Do
A debt settlement company claims it will, for a fee, persuade your creditors to take as little as half
of what you owe to resolve your debt. Sounds good! Since you probably don't have a bunch of
cash laying around, you'll pay the debt settlement company a series of monthly payments. First,
know that typically your payments go 100% toward the settlement company's fee until the fee is
paid. Only after the fee is paid do you start building a settlement fund. When you've built up
enough in your debt settlement account, the company will try to settle one of your debts.
Here's the Catch
Your creditors have agreed to nothing. During the many months you are making payments to the
debt settlement company, the creditors you've been told will settle are starting or continuing
aggressive collection activity. You get phone calls and letters and worse, and you could be sued
and face garnishment while the debt settlement company is holding your money. Telling creditors
that you've signed up for a plan with Settlements-'R-Us, Inc. and are making monthly payments
will carry no sway whatsoever with your creditors. They won't care. To avoid garnishment, you
could be forced into bankruptcy. You can get back from the debt settlement company the money in
your account, but the fee you've paid is probably gone forever, even if the company didn't settle a
single debt for you.
The moral of this story? Never consider signing up with a debt settlement company unless you get
from each creditor involved a document, on the creditor's letterhead, that states the creditor will
accept a specific dollar amount on a specific date in the future to totally resolve your debt, AND, in
the meantime, the creditor won't pursue collection of the debt.
If you do have a lump of spare cash, you should consider doing your own settlement, along with
other options, to pay off unsecured debts. Keep the following in mind:
You need an Emergency Savings fund. Don't use every spare penny you can scrape together to
settle a debt and leave yourself vulnerable.

2. It's 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 IRS
considers forgiven debt to be part of your income, and you likely will owe income tax on it on April
15th of the next year. Your debt settlement strategy must include a plan for having the cash to pay
the tax on the forgiven debt. You don't 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 worse
impact on your credit score than any method that would result in full repayment of the debt, like a
Debt Management Plan. After a debt settlement is done, your credit report should show the settled
debt 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 years
after settlement.
With Those Cautions in Mind, Here's How to Settle a Debt
Understand the source of your power in the settlement negotiation: You may not pay the debt at
all. Before any creditor will agree to settle a debt, it must be convinced it will be better off
accepting 40% or 50% of the total balance today instead of trying to collect 100% of the debt over
many future months or years. This means few creditors will negotiate a debt settlement until the
account is seriously past due and successful collection is clearly, from the creditor's point of view,
in doubt.
If you reach a settlement agreement, the creditor will want the payment in a lump sum right away.
Don't start settlement negotiations until you have in hand the cash you've decided you can spare
for debt settlement.
Write a letter to the creditor proposing a specific settlement. You can find many example debt
settlement letters on the Internet by searching "debt settlement example letter." Photocopy for
your records this and all correspondence with the creditor. Send all creditor correspondence by
certified 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 question
because it depends on the situation. The more severely delinquent the debt, the less the creditor
is apt to settle for. The lower the creditor judges the odds of collecting the debt in full, the less the
creditor is apt to settle for. If you've missed two payments on a credit card debt, the credit card
company is unlikely even to engage in settlement negotiations, period. But if you stopped paying
on a credit card debt two years ago and the credit card company has charged off the debt and
sold it to a collection agency, and you've paid the collection agency nothing and ignored their
collection letters and calls, and your credit score is in the dumps, you may find the collection
agency 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, you'll want to leave room to improve your
offer, so in most cases it's probably smart to offer less than 40% of the balance.
Say you've decided you have $3,000 of spare cash you can devote to settling a $6,000 debt. Start
negotiations by offering less than $3,000, perhaps $1,500 or $2,000. If the creditor counters your
offer with $4,000, you can, if you choose, improve your offer to $2,500 or $3,000, but don't offer or
agree to a settlement over the $3,000 you've decided you can spare. If the creditor won't 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 in
the phone call and include in your notes the date, time, and caller's name and employee ID
number. Agree to nothing on the telephone. Even if a verbal counter offer is acceptable to you, tell
the caller you need the offer in writing before you will agree to it. If the creditor refuses to make the
offer in writing, tell the caller you will not agree to any settlement that's not documented in writing,

3. and politely end the call with an invitation to the creditor to re-open negotiations with a letter
specifying all terms of its settlement offer.
Do not agree to any settlement offer unless it's in writing and 1) names the dollar amount agreed
to; 2) names the date by which the settlement amount must be received by the creditor; 3) states
that the creditor agrees that this dollar amount will fully resolve the debt and it will not pursue
further collection; 4) states the creditor agrees to report the account balance as $0 to all credit
bureaus that include the debt on your credit report; 5) includes the exact wording of the notation, if
any, 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 settlement
payment promptly, by cashier's check or money order and keep the receipt that accompanies the
check or money order. Send the payment by certified mail, and be sure to get a receipt from the
postal service indicating the date of delivery to the creditor. Don't cut it close-mail your payment at
least 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 reporting
bureaus. Examine closely each of the three free credit reports you'll get over the next year. If the
settled debt still appears, the balance should be $0. If the creditor agreed to specific wording for
any 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, don't waste your time contacting
the creditor. Instead immediately pursue resolution by following the Federal Trade Commission's
procedures for disputing information on your credit report. Your evidence is the written settlement
agreement from the creditor, your cashier's check or money order receipt, and the postal service
receipt showing the date the payment was delivered to the creditor.
Finally, nothing above is legal advice. Consult an attorney to assure a legally binding, watertight
settlement agreement with a creditor.
Kurt Fischer is a certified credit counselor and founder of http://www.MyMoneyCounselor.com
Article Source:
http://EzineArticles.com/?expert=Kurt_Fischer
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Hello, if you would like more help with your debt please visit the link below
www.debtsettlementorder.com
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