Christian Debt Recovery

Unsecured Debt Settlement Info

  Unsecured debt settlement info 

      Debt settlement is the fastest and least expensive way to get out of debt period. The fact that it is interest free and many debt settlement programs reduce the principal balance by half makes people very interested. When done right debt settlement can be an absolute godsend. If you have thirty thousand dollars worth of unsecured debt and you pay minimum monthly payments to you creditors it will take you 50+ years and at least $112,000 to pay it off and your credit will be below average for that duration. With a debt settlement program, you will pay about $16,500 plus a small service fee usually between $50-$75 a month and you would be debt free in as little as 1-4 years. For instance, if you owe $30,000 in credit card debt and you have a low interest rate you would be paying at least $900 a month and it would take you 50+ years to pay it off, with debt settlement you can go into a 24 month program with a payment of $753 a month with all fees included, that’s around $150-$200 a month less than you would be currently paying with a total savings of $11,928 not including all the interest you would be saving. Lets do the math, you owe $30,000 with interest it would take you 50+ years and about $112,000 to pay it off, with debt settlement your $30,000 would become $16,500 if you add in the fee of $65 per month and you go into a 24 month program you would pay $18,072 in total. If you deduct $112,000 from $18,072 your total savings would actually be $93,928.

     If you do consider debt settlement, it is important that you choose a reputable attorney backed firm that can remove any negative marks associated with the accounts that you enroll into the debt settlement program. Debt to income ratio accounts for 50% of your credit score. Even if you have a long credit history and you have never been late on a payment your credit can still be below average because of your debt to income ratio. Another important reason you should only use an attorney owned company is the fact that the U.S. government is trying to regulate the debt settlement industry. There is a good chance that only attorney affiliated companies will be allowed to do business as debt settlement companies. Most debt settlement companies make about 15% of the total debt enrolled, most of which is taken within the first year of the program. If the company you choose in not attorney affiliated and is forced out of business, you could be left with more debt that you had before and your credit will be even more damaged. You should only choose an attorney owned company that will guarantee you free attorney representation if needed, at least 40 hours per year and make sure that all unused hours roll over to the next year.

     Most debt settlement programs are considered hardship programs and are for people that are behind, at risk of falling behind, or have considered filing for bankruptcy. When choosing a debt settlement firm it is important to do your homework. Make sure the firm you choose is attorney owned and operated or at least attorney backed. It is recommended that you check their credibility with www.settlementratingsystem.com to make sure that the firm you choose has a good rating. Also it is important to completely understand how debt settlement works. Debt settlement is not a consolidation loan. It is a program that will help you save money to pay your unsecured debts in the future. Debt consolidation, on the other hand, is a program designed to simply reduce your interest rates among your creditors. Depending on the amount of debt that you owe, it may take literally decades to clear your name, even with a reduced rate. Not to mention, consolidation will negatively affect your credit score. Debt settlement will only negatively affect your credit while you are enrolled into the program, once you have completed the program and you have eliminated your unsecured debt you will have lowered your debt to income ratio, thus increasing your credit worthiness. You should only hire a debt settlement firm that offers a free credit restoration at the end of the debt settlement program.

     With a debt settlement program your monthly payments go into an escrow account that will be set up in your name and the debt firm attorney’s name. Make sure the debt settlement firm you decide to go with provides you with the ability to monitor your account. A reputable company will provide you with a user name and password so you can see what is going on at all times. Most good debt settlement companies reach an agreed settlement with the creditors with in the first 4-12 months of your program. However your creditors do not get paid until the money is available in your escrow account. Most debt settlement companies settle your debts from the smallest to the largest as the money becomes available. Your first actual settlement will not take place for at least three months. You must be 90 days late before your creditors will settle. Once you enroll into a debt settlement program, the firm’s attorney should send several letters including debt validation letters and “cease & desist” letters, which requests that all further communication in reference to your account be directed to them. Often times, the creditors will continue to contact you, which is completely legal. However, once your debt is sold to a collection agency, the Fair Debt Collection Act is implemented, meaning that it would be illegal for a collector to communicate with you in connection with the collection of any debts. A debt collector may not harass or abuse any person in connection with attempts to collect a debt. So the harassing phone calls will eventually stop.

     People often ask, should I just claim bankruptcy? Bankruptcy is an option that is treated as a last resort. It will remain on your credit report for 10 years and you can be denied employment, state licenses, insurance, as well as tenancy of an apartment. Most importantly, you can be denied virtually any type of credit with a bankruptcy on your credit report. In addition, since the bankruptcy laws have changed recently, it is even more difficult to qualify for chapter 7, the method of liquidating assets to eliminate your debt. You will not be allowed to discharge alimony, child support, taxes, student loans, judgments, or any loan on the bankruptcy petition. Under Chapter 13 bankruptcy, your debt payments are simply restructured meaning you will still have to pay a percentage of your debts while you suffer the consequences of bankruptcy. Debt settlement is an attractive alternative to bankruptcy. It provides a convenient method to save money to help pay your debts interest free in the near future. You’ll be able to restore your credit much quicker through a settlement program, especially if the firm you choose includes a free credit restoration.

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