Beware Of Debt Settlement Scams
Some companies offering debt settlement programs may engage in deception and fail to deliver on the promises they make for example, promises or guarantees to settle all your credit card debts for, say, 30 to 60 percent of the amount you owe. Other companies may try to collect their own fees from you before they have settled any of your debts a practice prohibited under the FTCs Telemarketing Sales Rule for companies engaged in telemarketing these services. Some fail to explain the risks associated with their programs: for example, that many consumers drop out without settling their debts, that consumers credit reports may suffer, or that debt collectors may continue to call you.
Avoid doing business with any company that promises to settle your debt if the company:
- charges any fees before it settles your debts
- touts a “new government program” to bail out personal credit card debt
- guarantees it can make your unsecured debt go away
- tells you to stop communicating with your creditors, but doesnt explain the serious consequences
- tells you it can stop all debt collection calls and lawsuits
- guarantees that your unsecured debts can be paid off for pennies on the dollar
Hiring A Debt Settlement Company
All in all, the decision to hire a debt settlement company boils down to the following factors:
- A debt settlement company is likely to know which creditors are more inclined to settle and for how much.
- A debt settlement program will provide you with the discipline to save money every month that you can use as leverage when negotiating. Remember that no creditor will want to make a deal with you unless you are ready to make a lump-sum payment.
- Hiring a debt settlement company will cost you a lot of money.
- Many debt settlement companies are known to be scams and do not have your best interests at heart.
If you do ultimately decide to hire a debt settlement company, this is roughly how things will work. Once accepted into a debt settlement program, consumers generally make payments to both the debt settlement agency and into an independently managed savings account. The payments to the debt settlement agency covers their fees and are typically non-refundable. The money from the independently managed savings account is leveraged by the debt settlement agency to negotiate with your creditors and should remain liquid and refundable in case you decide to withdraw from the settlement program.
Debt settlement companies may not assess fees until they have:
Before a consumer enrolls in a debt settlement program, the settlement company must notify them about:
Working With Debt Settlement Companies
If you can’t make your minimum monthly payments and you want to work out a settlement with your credit card company, but you donât want to do it yourself, a debt settlement company can take over the negotiation for you. Debt settlement companies negotiate with your creditors on your behalf to help you settle your debts for less than you owe. This may be paid in payments or a lump sum. They will often require you to deposit money every month in a savings account for as long as it takes to save up a good lump-sum payment.
Pros and Cons of Using a Debt Settlement Company
There are risks to using a debt settlement company to help you resolve your debts. There are many scams out there, so itâs very important to do your homework and investigate the reputation of any debt settlement company youâre considering using because not all of them are legitimate.
Another risk is that you may have to save up money for months or years to have a lump sum to offer your creditors. During this time, your credit score will suffer and creditors can proceed with collections activity, including filing a lawsuit to garnish your paycheck. This also wonât stop debt collection calls. This is a major difference between a debt settlement program and a debt management plan or filing bankruptcy.
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How Do You Repair Your Credit After Debt Settlement
Debt settlement stays on your credit report for seven years, starting on the first date of your delinquency. In order to repair your credit after a settlement, it is important to not go over your credit limit, pay your bills on time, and make sure your debt to credit utilization ratio stays in balance.
Is Debt Settlement Worth It
While debt settlement has its drawbacks, there are some financial situations that make it a good debt relief option. For instance, those who owe a large amount to one creditor may find it a good solution. If a creditor is willing to accept half of what you owe to settle a debt that you wouldnt be able to repay, thats an option worth considering.
But its important to weigh the pros and cons of debt settlement related to your situation before deciding to enter into an agreement.
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A Good Debt Settlement Company Will:
- Disclose all program fees and costs before you sign up for a debt resolution program
- Have easy-to-understand written policies about its debt resolution program
- Give you an estimate of how many months or years it will wait before making an offer to each creditor
- Estimate its intended results, but never guarantee a specific settlement amount
- Tell you how much money you must save up before it will begin making offers to your creditors
- Send all resolution offers to you for your approval
Curadebt: Best For Tax Debt Relief
Since 2000, CuraDebt has helped thousands of customers save as much as 30% on their debt payments, including back taxes. Along with accreditations from the American Fair Credit Council and the International Association of Professional Debt Arbitrators, the Hollywood, Florida-based company has earned an A+ BBB rating due to its transparent practices and excellent customer service.
CuraDebt can settle several types of debt, like credit cards and personal loans, but what makes the company stand out is its focus on tax debt, a niche that not many other debt relief companies touch.
Theres no doubt that CuraDebt is the best debt settlement company for tax debt, with its agents boasting over 60 years of combined experience helping to resolve taxpayers liability with the Internal Revenue Service and state tax authorities.
Like many debt relief companies, the debt settlement process at CuraDebt starts with a free consultation during which you and a specialist will come up with a solution, such as an offer in compromise agreement, an installment agreement, or a custom option.
Next, one of CuraDebts tax experts will request an immediate stay of enforcement with the appropriate tax authority and then conduct a financial analysis. If any compliance is needed, theyll make sure all tax forms in question are filed or amended. At this point, the consultant will implement the solution you agreed upon during the consultation to resolve your tax issue.
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When A Credit Card Debt Is With A Third
Golden Financial Services tries to keep clients away from settling a credit card debt, until after they dispute the debt and its proven to be legally collectible, which rarely occurs. Most of the time, debt collection companies cant prove a debt to be lawfully collectible, due to missing paperwork or inaccurate information.
Debt Settlement Might Create Income Tax Liability
Example. Claire owes $12,000 on a credit card and successfully negotiates with the credit card company to settle the debt for $8,000. She pays $8,000 to the credit card company, which forgives the debt and reports it to the credit reporting bureaus as “paid in full.” The credit card company reports the settlement to the IRS, which notifies Claire that she must pay taxes on $4,000, the amount the credit card company forgave. To the IRS, the settlement was equal to the credit card company giving Claire $4,000.
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Script To Say When Answering Debt Collection Calls & Dealing With Harassment
Answer the phone-call and say:
I have no funds to pay right now due to losing my job , and furthermore, the debt youre alleging I owe doesnt sound accurate. There was recently fraud in my name and several accounts opened that are not mine. Send me whatever balance youre alleging I owe, in writing, so that I can review if its mine or not. . Im also currently talking to a bankruptcy attorney who has requested that I ask any creditors who call to send everything in writing that theyre alleging I owe. And just for the record I have not retained this attorney as of yet, the attorneys only recommending I do bankruptcy, but so far Ive only received a free consultation from this attorney. Im hoping to resolve any of my debts without bankruptcy. Most of my other creditors already offered to settle my debts at between 15%-35% of the balance, so if this is something your agency would consider please also include any offers in writing. In the meantime, Im working on trying to borrow some funds from a family member, so that I can hopefully settle any of the debts that are mine and avoid bankruptcy. Thank you
This script can be used on the original creditor or a debt collection company.
If creditors think that youre on the urge of bankruptcy, theyre often more inclined to settle immediately because they know that if you file for bankruptcy they could get zero dollars.
When Should You Consider Negotiating Your Credit Card Debt
Its a personal decision. However, many consumers negotiate credit card debt when the monthly payments become unbearable. Suppose youre forced to choose between basic necessities, like food, clothing, shelter, and transportation, and credit card debt. In that case, it may be time to negotiate your credit card debt.
Or maybe getting out of credit card debt doesnt seem practical because the interest rates are too high? Consequently, the minimum monthly payment is steep, and you cant afford to pay much more every month, which means youll likely be haunted by credit card debt for several years to come. In that case, negotiating credit card debt could be a smart financial move.
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If A Creditor Fears That A Debt May Have To Be Written Off All Bets Are Off
Offloading all or a portion of your personal debt via settlement can seem like a daunting task when you feel like you’re in over your head with debt. But one of the great truths in business is that everything is negotiable. Even when the price or terms of something seem set in stone, getting a discount is often as easy as knowing whom to ask and how to ask for it.
When it comes to the balances you owe on your credit cards, for example, there might be an opportunity to negotiate what you actually owe. With a little bit of knowledge and guts, you can sometimes cut your balances by as much as 50% to 70%.
How To Settle Credit Card Debt
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You Can Often Negotiate Better Interest Rates Payment Dates And Even Long
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It’s often possible to negotiate terms, interest rates, and payments on credit card debt. You can also try to negotiate a settlement of the amount you owe. The steps you take and the options available will depend on your situation and the credit card company you’re dealing with. Your options might include:
- moving a payment date
- asking for a temporary payment reduction.
- entering into a forbearance agreement, which requires no payments, for a specified amount of time
- working out a long-term repayment plan with reduced or no interest, or
- paying a lump-sum to settle the debt.
Your negotiating strategy will primarily depend on timing. If you’re not struggling with your payments, you might be able to get a better interest rate. If, however, you’re in financial hot water, you might be able to get better payment terms or dates, perhaps a reprieve from payments, or settle the debt for less than you owe.
You Could Still End Up Making Monthly Payments For Up To 4 Years
Debt settlement still requires money to make settlement offers. Creditors and collectors wont forgive your balances and get nothing in return you must pay them something. So, you need to generate money for a settlement.
Heres how to works:
So, youre still going to end up making monthly payments, even with a settlement program. And a settlement program can take anywhere from 12 to 48 months, depending on how much you owe and how much you can set aside each month.
What if I dont have any money to make monthly payments?
If youre wondering where you get the money to make the monthly set aside, it depends on the settlement company. Reputable companies will review your budget and help you cut back to generate the biggest monthly set aside possible. But some disreputable companies may advise you to stop making any payments to your creditors and use that money for the monthly set aside instead.
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Balance Transfer Credit Cards
A balance transfer means moving burdensome balances to low-interest or interest-free credit cards. Credit card companies typically require you to have a credit score of around 700, so this might not be the debt relief solution for you if your credit is struggling. Plus, a transfer fee of around two to three percent usually applies.
Is Credit Card Settlement A Good Idea
Typically, youre advised to avoid credit card settlements because of their impact on your credit score. However, depending on your current situation, you may have no other choice but to settle. For this reason, it is important to know how to negotiate credit card debt settlement yourself, as it allows you to approach the issuer and avoids the fees associated with hiring a debt settlement agency.
The bottom line is that to avoid a situation where you need to resort to a settlement, ensure that you spend only what you can afford via your credit card and clear bills on time. Opt for a credit card issuer that allows you to make payments via multiple payment gateways to simplify the latter. The Bajaj Finserv RBL Bank SuperCard is one such option as you can pay using any of the six payment options. Among them is the RBL MyCard app that allows you to pay your bill in just a few taps. Use this feature to ensure that you never miss a .
The SuperCard also allows you to benefit from various credit card offers on lifestyle, entertainment and utility purchases. Additionally, you earn reward points on every transaction, facilitating greater savings of up to Rs. 55,000 per year. To avail of all these benefits and more instantly, all you need to do is check your pre-approved offer online. Apply using a customised credit card offering and get quick approval.
*Terms and conditions apply
The Disadvantages When You Settle Credit Card Debt
The credit card companies may or may not accept your offer theyre not obligated to settle your debt and may choose instead to pursue legal action against you. And while it may be possible to settle credit card debt for less than what you owe, your credit rating will take a hit. It may take as long as seven years before you can successfully apply for loans, credit cards, a mortgage, or a rental agreement. Also, when you settle credit card debt, you may not save as much money as you think. Youll have to pay a sizable fee to your settlement company, and the IRS may take a significant amount in taxes as well.