Ara Betty is a freelance financial writer and speaker about personal financing. She helps people realize their goals on becoming debt free with the use of debt consolidation. She hopes to expand her knowledge more about loans and debt to be able to write a book.
You are very much in debt and you want to get out of it? You are not the only one. In fact, credit card debt settlement is so popular that you can hear about it anywhere – on TV, radio and there are tons of articles about it on the Internet as well. With all that fuss, it is only normal that a lot of myths have been created around the topic of credit card debt settlement support. However, you want to stay on the safe side. Do not get tricked. We are here to inform you what you can trust about selling credit card debt and what not. In this article, you will find out the 10 most popular myths about selling credit card debt.
First, you need to understand what is credit card debt settlement and how it works. With so much information out there, it is easy to get confused. In fact, credit card debt settlement is not so complicated as it may sound at first.
There are also some terms which you need to understand. Here are some of them:
Credit card debt settlement
it is the settlement arranged by your credit card debt settlement company with your creditors. Through that settlement, you get a reduction of your debt.
it is a loan that is not linked to any underlying assets of yours. Credit card debt is an unsecured debt.
it is the kind of debt related to an asset you have. In most cases, it’s your car or your house. The way it works is that if you are very late with your payments or have stopped paying them altogether and have not contacted your creditors, you can lose your property. That is because your property serves as a guarantee for your debt and when you do not take care of your debt, your creditor can sell your asset (that is collateral for the debt) to get his money back.
It is called “secured” because there is a higher chance for the borrower to be able to collect his money and therefore the loan has a lower risk. The most popular one is mortgage which a type of secured debt related to your home. In some cases, you can even take out a second or third mortgage. However, in those cases, it will be for a smaller amount of money than the first mortgage.
That is a figure that does not always appear when you have debt. When you have not paid what you owe for 180 days after it was originally due, your creditors pretty much give up on you. That is when they send your case to a debt collector.
Debt settlement companies
Debt settlement companies are companies that fix your financial situation. For a certain fee, they negotiate with your creditors and help you collect enough money to repay your debt. They are your perfect partner for becoming debt-free.
Debt settlement attorney
Debt settlement attorney or debt settlement lawyer is a legal professional whom you can hire to provide the same service as a credit card debt settlement company.
Debt settlement letter
This is a general term for all kinds of letters sent and received by both your credit card debt settlement company and your creditor during the process of negotiation. You can find some sample letters on the Internet. Those include but are not limited to an offer letter, a counter offer letter, letter of acceptance of a verbal offer and others.
This is the settlement you reach with your credit card debt settlement company. That amount is the amount you have agreed to put in your special saving account after several months. Only after you have this lump sum from the settlement, the negotiations with your creditors will start.
Debt relief service
This is a general term that includes both debt settlement and debt consolidation (there is a slight difference between the two terms, mainly in who offers the service and how much it costs)
Most simply put it is a scam. Certain companies claim they can clear your bad credit report history for you. No one can do that unfortunately. The only thing you can do is go out of debt in the first place and try to maintain a better credit card record in the future.
10 myths about selling credit card debt
Now that you have an understanding of the basics terms, it is time to learn the truth about debt relief service. Not everything you can read online is correct and correspond to the reality of things.
Everybody can pay less for their debt for almost any reason or even without one
That unfortunately is not true. There is an underlying criteria that both creditors and legitimate credit card debt settlement companies should screen their clients. They should make sure that you meet the criteria before they do business with you.
People who are considered eligible are normally those who need credit card debt settlement due to temporary reasons. They have reached the point of being too much in debt. However, in some cases, people who just overspent may classify.
To sum up, although there is certain criteria there is still a high chance you might classify. It depends on many factors and it is an individual thing but you have to try. Our advice is to do a little research and try to find a credit card debt settlement company. See what they tell you and go from there.
I can settle my credit card debt on my own
Many people are convinced that “it is not that hard and I can just negotiate for myself”. No matter what brought you to that thought – from I have always been good at negotiating to I do not have enough money to pay a credit card debt settlement company, you need to stop and think it over. Although hiring a credit card debt settlement requires you to pay for their services, you are getting a lot out of this deal.
First of all, these companies provide professional services. They have been doing this much longer and more successfully than you. The thing is – you do need outside help. Secondly, your creditors are more likely to speak to a debt settlement company than with you.
In many cases, credit card debt settlement companies have established relations with the creditors whom they have worked with in the past. It makes the whole process easier and faster. Make the smart choice and do not try to negotiate on your own. It will probably not work out the way you want.
The only options I have are credit card debt settlement and bankruptcy
That is not exactly true. There are several options out there and you can find a complete list of them on our web page. They include self-help, debt consolidation, credit card debt counseling service, bankruptcy either under Chapter 7 or Chapter 11 of the Bankruptcy code. Many Americans think that filing for bankruptcy is not a big deal. In fact, it is an extreme measure and it should be taken with caution only when there is a real need. That is for example the case when you have tens of thousands of dollars of debt.
Not only is bankruptcy a really extreme thing to do, it is expensive as well. You have to pay stay fees and court fees and attorney fees. Bankruptcy is rarely the solution for your problems. The reason why this myth persisted is because bankruptcy is so popular in common language and movies. Debt settlement is by far the best option out there. It is the established way to fix your financial situation and it works. Although you know there are other options, you should also remember credit card debt settlement is probably the best one. It gives you a wanted result you cannot achieve otherwise.
I have many other options better than credit card debt settlement
You do have other options but the thing is, they may not be better than credit card debt settlement. Once you compare the pros and cons of debt settlement with all the disadvantages the other options, it will become clear to you. Credit card debt settlement is probably the easiest, fastest and cheapest way to get out of debt. It is the reason why debt settlement is the established practice in the area.
I have to pay in advance to the debt settlement company and they control my money
You should know that this is not always the case. Although previously credit card debt settlement companies were able to request for advance payment, that is not the case anymore. Due to some changes in litigation, debt companies that use telemarketing (saying that they offer their services over the phone) are banned from collecting their fees in advance (meaning before they have performed any actual service for you). This rule is by the Federal Trade Commission and is in effect since October 2010. In all honesty, this is more one of the most common scams out there.
Moreover, the credit card debt settlement company does not control your money. You will be required to have a separate bank account to save the needed amount of money but that does not mean that the credit card debt settlement company controls your money. This approach has been chosen because it is the only way in which you can separate the money you need for paying your debts from the amount you use for your daily needs and other expenses. It is actually making it easier for you to reach your goal.
You should be aware that this account is actually supposed to be controlled by a third independent party (which all, by the way, is no supposed to receive a referral fee- that is another popular scam- more on what to be careful with while part of a credit card debt settlement procedure you can find on our web page). There is an important difference between myths and scams.
Credit card debt settlement will hurt my credit card report
That is another myth. As every other financial operation credit card debt settlement will reflect on your credit report but it is a procedure designed to make you debt-free. Not owing money is actually good for your credit report. Thought the process you may have to stop making payments to some of your creditor temporarily and that might have some reflection on your credit report as well. However, this effect will be temporal and the end result will be that you are free of debt and have a good credit card report.
If I do not reach a debt settlement, my debt will chase me forever
That is fortunately not true. There is actually a certain number of years after which your creditors cannot enforce your debt legally in court. That is regulated by the statute of limitations. You should have in mind that the number of years vary from state to state. However, if you have not paid for a certain amount of years, you actually do not have to anymore. After the limitation period has expired, you are under no obligation to pay to the creditor and he has no legal way to force you to. Any payment you make after that period means two things.
Firstly, it is completely voluntarily and secondly, it is not in your interest since it probably negates the limitation argument. The thing is that in order to use that option, you need to use the limitation argument on time (at any point after the period has expired). If you have paid voluntarily after that period, you cannot ask for your money back using the limitation argument. The thing is, you have not paid without a reason – your debt does not really cease to exist. It is just not enforceable in court anymore and therefore, you can skip paying it.
When the legal obligation goes away, so will the credit damage. Of course, that will only happen after seven years that is when the fact you have not paid will no longer occur on your credit report.
When I am done with debt settlement, I will be completely free
Unfortunately, that is not absolutely true. The problem is not that credit card debt settlement companies make promises they cannot keep . The thing is, there are some kinds of debt that simply do not qualify for debt settlement. Those include but are not limited to student loans, alimony and child support or taxes. Even you file for bankruptcy, you will still have to pay them.
They chase you forever, especially taxes. You should bear in mind that even if you reach a really good debt settlement, your creditors will report it to the IRS which might consider the money you have saved from paying less as an income and therefore taxable. Do not worry too much as that is not always the case and there are a few exceptions.
Using a credit card debt settlement company is very expensive
Not to say it comes without a price, but you do not really have other ways to get out of debt for free. To start with, all the related services out there are paid. Hiring a credit card debt settlement company is probably among the cheapest compared to bankruptcy. With bankruptcy, you have to pay for filing the document, court fees and those are up to several thousand dollars. In addition, you will need to hire a lawyer to represent you in court and their fees vary. So with credit card debt settlement, you can at least make your money worth.
Debt settlement is a bad idea
In fact, credit card debt settlement is a well established practice. It is easy, quick and cheap. Although it has some pitfalls, it is probably one of the best ways to deal with your debts. The myth that debt settlement is a bad idea may have stemmed from the fact there are certain possible scams schemes out there. However, you can stay clear of those scams by simply being careful.
Those are the 10 most popular myths about credit card debt settlement. You need to be critical of what you have read online. Credit card debt is hard to deal with but it can be settled and you can be debt-free.