10 myths about selling credit card debt

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

credit card debt settlement

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.

Unsecured debt 

it is a loan that is not linked to any underlying assets of yours. Credit card debt is an unsecured debt.

Secured 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.

Debt collector 

Debt collector

Debt collector

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.

Lump-sum settlement 

Lump-sum settlement

Lump-sum settlement

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)

Credit repair

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

credit card debt settlement myths

credit card debt settlement myths

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.

  1. 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.

  1. I can settle my credit card debt on my own

do not try to negotiate on your own

do not try to negotiate on your 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.

  1. The only options I have are credit card debt settlement and bankruptcy

There are several options

There are several options

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.

  1. 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.

  1. I have to pay in advance to the debt settlement company and they control my money

credit card debt settlement company does not control your money

credit card debt settlement company does not control your 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.

  1. 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.

  1. 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.

  1. When I am done with debt settlement, I will be completely free

some debts simply do not qualify for debt settlement

some debts simply do not qualify for debt settlement

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.

  1. 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.

  1. 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.

Credit card settlement – the best way to get out of debt!

Are you deep into debt and searching for a way out? We are going to explore some options which may help you make the right decision. Needless to say, credit card settlement could be the best financial option for you – it is cheaper, easier and faster than any other alternative that you have.

How to know if this article is for you:

  1.    Have trouble paying your bills
  2.    Get scary and/ or annoying calls from your creditors
  3.    Worried you might lose your home
  4.    There is an actual possibility that your car could be taken away from you
  5.    Find yourself unable to support your family needs
  6.    Have most/all your accounts already turned to debt collectors

You are not alone in your financial troubles. Many people have money problems at some stage in their lives. The good thing is, you can overcome them. You just need to take action while it is still possible. Don’t let your financial situation get worse!

There are many reasons that could have led you to this point, from family problems, loss of a job to overspending. Whatever it is, your financial woes can be put to an end even though it may seem overwhelming at first.

The main factors that land you in your current financial state could be the types and amounts of debt you have, your level of motivation and ability to deal with the problem and your current and possible future situation. Take a look at some of the methods which could help you reduce or resolve your debt here.

What are the ways to get out of debt?

You might have thought there is only one way to get out of debt – to pay what you owe your creditors. However, sometimes debts could reach such unimaginable amounts that it seems impossible for you to pay them all off in this lifetime. What you need to know is that you have several financial options to solve the problem at hand.

  1.  Credit card settlement
     Credit card debt settlement

    Credit card debt settlement

    Credit card settlement is an established method to deal with your debt. The good thing about it that you do not deal with your creditors – the credit card debts settlement company does that on your behalf. In addition, their job is to make your debt go away for less than it actually is. Meaning that they will negotiate with your creditors and reach an agreement for a smaller amount. At the end of the process, you can be debt-free which sounds like a dream but it is a real possibility as that is what happens to a lot of people. On our website, you can find detailed information on how the procedure goes step by steps and the risks involved and how you can easily overcome them. Credit card debt settlement is probably by far the best method to get rid of your debt.

  1.    Self- help
Self help

Self- help

Actually, every step you take to resolve your financial situation is a self-help. This means you do everything on your own and do not get any professional help. It will take a lot of organization, devotion and planning on your own. One of the most important things is to stay realistic and be honest with yourself whether you able to do it on your own. If you believe in yourself, here is how to get yourself out of debt without seeking professional help:

–    Develop a budget

You should always start with having a very clear and realistic idea of how much you have and can earn against how much you spend. The best way to do that is to make a list of all the payments you have to make every month such as insurance, car payments, mortgages and others. The good thing about this is they are all fixed amounts and are easy to calculate. Then you have to also list expenses that are unavoidable, such as food, clothes or entertainment. Follow your spending habits to find your weak spots. Do not forget to include all your sources of income. The goal is to be able to make ends meet and pay all your debts.

–    Try to negotiate with your creditors

Try to negotiate with your creditors

Try to negotiate with your creditors

When you start really having trouble with repayments, it is advisable that you contact your creditors straight away. They might be willing to consider your situation and offer a modified repayment plan. The sooner you do that, the better it is.

Once your accounts have been turned to a debt collector, it might be too late. Your creditors might be unwilling to negotiate with you. In those cases, it is better when you get a debt settlement company which has more experience than you and may have established relations with some of your creditors. They may also be able to settle your debt for less.

–    Deal with your debt collectors

An important thing you should know is that federal law actually regulates when your creditors may contact you and they definitely cannot contact you during 9p.m. and 8a.m. In addition, they are obliged to respect your will if you have made a written request not to be contacted anymore. There are many other bans imposed on debt collectors as well – they cannot lie or use unfair practice when trying to collect their debt from you. Do not let yourself be bullied.

–    Manage your loans

Manage your loans

Manage your loans

There are two kinds of debt – secured and unsecured. Although unsecured debt is harder to go away, it does not mean you should not worry about your secured debt. Secured debt is normally tied to something you owe such as your car or your house. It is called secured loan because if you stop making repayments, your creditors can repossess your property.

Most automobile finance agreements have a clause to do it by default. Meaning they do not even have to give you notice in advance. It is almost the same with your mortgage. The difference is that you are facing foreclosure. Contact your creditors and check what options they are willing to give you. Make sure you ask if there are additional fees to pay.

Credit card debt is unsecured debt. So are medical debt and signature loans. They are not tied to an asset and have a higher risk for the borrower. Therefore, your creditors on those types of debt would be more eager to receive your payments and are more unwilling to negotiate with you.

  1.    Debt relief service
Debt relief service

Debt relief service

Debt relief services may be used as a general term relating to both credit counseling and debt settlement. Credit counseling is a not very good alternative to debt settlement. Although they seem alike in many ways and share certain similar steps, credit counseling has more pitfalls and does not offer the same end result as debt settlement.

In credit counseling, you merely get advice on how to deal with your financial situation by credit counseling organization. They offer their services through local offices, online or by phone. Trained professionals will look at your whole financial situation and work with you on a personal plan which will help resolve your financial issues. There is no saying how this may end – will you be left with more debt or be debt-free? Will you have a higher or lower credit card score? How will it affect your credit report? The question you really need to ask yourself is how much can you trust the advice you have received from those organizations.

Many say it is an advantage that those services are provided by non-profit organizations compared to credit card debt settlement companies which are pro-profit. However, what they do not tell you is that this does not mean their services are free. In fact, in many cases, they have very high fees or even request you to make donations to the organization.

  1.    Debt consolidation
 Debt consolidation

Debt consolidation

It is a somehow complex method of debt refinancing. It involves you taking up yet another loan to pay off many other. You might be able to achieve it through a second mortgage or a home equity line of credit.

A second mortgage, as the name suggests, occurs when the first one is still in effect. It will receive payments only after the first has been paid off. Therefore, its interest rate tends to be higher. Naturally, the amounts borrowed would be lower than with the first one. It can also last from one to twenty years but the shorter the period, the higher the monthly payments. It also comes with lending fees.

Another thing is that those loans require you to put up your home as collateral. It is how the borrower secures the repayment of your debt. It serves them as a protection if you do not pay. For you, that means that if you cannot make the repayments or in some cases, you are late with your repayments, you can lose your home.

A line of credit is a flexible loan from a bank. The bank will offer you a limited amount of money you can access as needed (in your case to repay your debts). However, you have to repay the bank – either immediately or over a specified period of time. It is something banks have started doing recently and it might not really work for you. You have to be very careful. Plan everything in advance on your own and pray for the best.

Debt consolidation is very hard to achieve and is not recommended. Even after this procedure, you will still be in debts. It is meant to only settle a fraction of your debts. It may leave you in a slightly better financial position, but you will not be debt-free and will still have a lot of payments to deal with, not to mention you credit report situation.

  1.    Bankruptcy
people who file for bankruptcy sometimes pay less

people who file for bankruptcy sometimes pay less

You don’t want to go there. Although bankruptcy can be an option, it has effects that will last long and are far-reaching. Bankruptcy information goes on your credit record and stays there for ten years. It is true that people who file for bankruptcy sometimes pay less because the court order may say they do not have to pay some debts. However, it can cause you many problems, for example, when you are trying to buy a home or life insurance.

In some cases, bankruptcy may even prevent you from getting a really good job because your future employers would want to see your credit record and a bankruptcy case is always a red sign. The thing with bankruptcy is that it is a legal procedure – it is the legal way to do it. Not to say that other options are illegal, but filing bankruptcy is what you are supposed to do when you have too many debts you can’t repay. Needless to say, it comes with many negative consequences as well.

There are two main types of personal bankruptcy. They are dealt with in Chapters 7 and 13 of the Bankruptcy code. You should not forget that these are very expensive legal procedures. Both types of bankruptcy must be filed in special federal bankruptcy courts. Meaning you will need an attorney to represent you. Filing fees are several hundreds of dollars and attorney fees vary depending on who you choose.

What is the difference between Chapter 7 and Chapter 13?

What is the difference between Chapter 7 and Chapter 13?

What is the difference between Chapter 7 and Chapter 13?

Simply put, one is straight bankruptcy (Chapter 7) and the other is not (Chapter 13). With straight bankruptcy, all your assets are going to be sold and the money gathered would be used for repayment of your debts. When we say all, you should know for the purposes of bankruptcy, certain assets are exempted. The state makes sure that you have enough left to sustain a minimum standard of living.

For example, your only home (if its cost is up to a certain amount. If it is too expensive, it may be sold and you can get a fraction of the proceeds to get a cheaper place to live in), some work-related tools in your profession or basic household furnishings (again depending on their value) can be exempt. Your property will be sold either by an appointed court official or turned over to your creditors.

There are also eligibility requirements for both Chapters you need to make sure you cover. In some cases, you will not be allowed to file under a certain chapter. That is because  an individual filing under Chapter 7 will get a discharge on debts and will no longer be liable for them. For example, before filing under Chapter 7, you need to satisfy a “means test”. However, bear in mind that the right to a discharge is not an absolute anyway (some types of debt are not discharged, such as student loans or alimony and child support) and you might not even get it.

What does Chapter 13 offer then?

Chapter 13 offers a more lengthy proceeding to give you a chance to keep some of your assets. In this case, the court approves a repayment plan which allows you to use your future income to pay back your debts. This plan usually varies between three and five years. You get to keep things you may otherwise lose such as your house that has a mortgage or your car. You don’t have to surrender any property under Chapter 13. After the procedure ended and you have made all the repayments under the court-approved plan, your debts will be discharged. However, do not forget there are eligibility conditions here too.

You still need to hire an attorney and pay them, pay for the procedure and court fees. Plus, you have to be paying constantly over five years. That takes a lot of financial commitment. Chapter 13 bankruptcy is unlike what you will get with debt settlement where the procedure is much faster, easier and cheaper. With debt settlement, you will have to make regular payments for only a couple of months.

Important things to remember
Important things to remember

Important things to remember

A very important detail about bankruptcy procedure is that you must get credit counseling. It must be with a government- approved organization and must be conducted within six months before you file for bankruptcy relief. You can find a list of such organizations at the U.S. Trustee

Are there any options you most definitely do not want to try?

When you are very much in debt, everything becomes a problem. At some point, all your options sound bad. Most of them come with many risks (sometimes avoidable, sometimes not) and uncertainty. However, there are scam options which you want to stay away from.

–    Credit repair

This is a service usually offered to people who have a really poor credit history. A so-called credit clinic claims that they can clean your credit report. Of course, this service is provided at a fee. First of all, be aware that there are federal and state laws forbidding any company dealing with debts to request payment of a fee before it has performed any kind of service to the client.

Secondly, it is impossible for them to legally do what they had promised. Some of them could falsify documents (an actual crime) and they can be sued under the Crime code. No one will take that risk for you for the fee you are paying them. The truth is, in most cases, they will request an advance payment from you and you will never hear from them again. Make an honest effort to repay your debts and improve your credit report.

Stay away from credit clinics – they have nothing to offer you. The things they can actually do, you can do them yourself for free. Contact a debt settlement company and get your debts settled soon.

–    Advance free loans

The companies who offer this service require you to pay them in advance. It is illegal for them to request for payment before they have rendered any service. You must be wary of those loan guarantees. However, some creditors offer an extension of credit through different means such as telemarketing. They require an application or appraisal fee in advance. While what they do is legal but they can never guarantee you will get a loan. The truth is no one can promise you that.

The legitimate service will not even claim that you receiving a loan is likely to happen (to be honest, if it was, you would not have to use their service, to begin with). In some cases, the fees these scam companies require vary from  a hundred to several hundreds of dollars. Do you want to lose your money over nothing? We guess not.

In conclusion

We tried to give you a complete overview of what lies ahead of you, downfalls and how to avoid them. We believe debt settlement could be the best option you have because it is efficient, fast and relatively affordable. As any other scenario, it comes with some risks but they can be easily solved. Stay informed and be careful when choosing your financial options.

Settling credit card debt – hidden risks and how to overcome them

When you are deeply in debt and searching for a way out, it might get overwhelming very quickly.  You may discover that there are credit card debt settlement companies that could help you in settling credit card debt. In fact, they offer to make your debt go away and they could do it cheaply. Truth is, there are some risks debt settlement. However, it may still be your best option out of crippling debt.

However, you should know that the good offer comes with some downfalls which you should take note of when making your decision. Rushing into something is never a good idea. That is why we want to help you make an informed choice in this article.

What are debt settlement companies?

What are debt settlement companies?

What are debt settlement companies?

Debt settlement companies offer debt settlement programs which normally consist of a series of steps. Their job is to negotiate your debts with your creditors and resolve them either in part or in full. They will reach a “settlement” with your creditors which is a lump sum payment that is less than what you actually owe. Of course, you still have to pay that lump sum.

You will be asked to put in monthly payments in a special savings account until a settlement is reached. It might sound tough to keep up with those monthly payments. However, when you are in debt, you have to pay back one way or another anyway.

Another thing is that debt settlements are typically offered by pro-profit organizations, meaning that they make money in the process. For debt settlement companies, it is a business like any other and it is not unusual to benefit from what they do.

Moreover, some debt settlement programs will request you not to make any payments to your creditors while you are part of the program. They might even ask you not to communicate with them in any way. Even though that might seem hurtful for you in the first place, any action on your part might harm future negotiations with your creditors.

The risks of credit card debt settlement

risks of credit card debt settlement

risks of credit card debt settlement

Debt settlement companies are able to settle one or more of your debts. At what cost though?

  1. You would probably be required to deposit money in your special saving account for up to two years before all your debt can be settled. That equals to 36 monthly payments. Many people find it impossible to keep up and as a result, drop out of the debt settlement program. Although that is a bad way out of the situation, it can be easily avoided through careful planning. When you have reviewed and planned your budget, you will be able to make the monthly payments. All you need to do is make sure you can keep up with the payments until the end of the debt settlement program. In any case, that sounds better than being chased by your creditors
  1. Although it is the established practice, some of your creditors may not agree to negotiate your debt. They are under no obligation to negotiate with your debt settlement company once they approach them to reach an agreement. So there is some chance your debt settlement company may not be able to settle some of your debt. However, that was never the deal. They have promised to settle your debt either partly or in whole.It is your responsibility who you start owing and how hard it is to deal with them later.
    In most cases, your debt settlement company would be useful to you because they work with creditors on a daily basis and have established relations with your creditors.They know what to expect and how to proceed so they will have a realistic idea what can be achieved. All you need to do is discuss your expectations with your debt settlement company and be clear of what they can offer. You need to be realistic too. In case you don’t have your debt settlement to settle your debt, you will have to deal with those hard nosed creditors on your own.
  1. Your debt settlement company may settle your smaller debts first. That means interest and fees on your bigger ones might go up in the meantime. The problem with being too much into debt is you often end up with many different debts owed to many different creditors. To be debt-free, you need a strategy. Reducing the amount of debt is one of them. Many creditors would be much more willing to negotiate with someone who has two creditors than with someone who has 50.
  1.  You might get calls from your creditors or debt collectors requesting you to pay again. Although those might be unpleasant, you should know they do not have the legal right to be paid twice for the same debt. If you want to stay out of trouble, do not do anything rash. It is probably best if you consult your lawyer. The important thing is not to let yourself become an easy victim. If they see they have a chance to deceive you, they will use it and might even sue you for not paying up. All you have to do is be prepared and know your rights.
  1.  Being part of a debt settlement program might have some negative effect on your credit report. That is because debt settlement programs often encourage you to stop sending payments directly to your creditors. However, it is an inevitable temporary situation that will change once you are out of debt. What can be better for your credit report than being debt free? Anyway, in most cases, you have a choice how to proceed so it is up to you.

How to avoid debt settlement scams?

How to avoid debt settlement scams?

How to avoid debt settlement scams?

Take your time when choosing the right credit card debt collecting company. There area  few ways in which they might try to deceive you and leave you with nothing of what they have promised. The most popular debt settlement scams are:

  1.  Some companies try to charge you fees before they have settled any of your debt. Although at some point that may sound reasonable as they are providing you a service, you should know that in this situation, you are paying for nothing because you have no actual guarantee that they will fulfill whatever promises they have given you.Another thing is that such a practice is forbidden by the Federal Trade Commission (FTC) in its Telemarketing Sales Rule (TSL) for companies engaged in telemarketing those services. However, you can be certain that you will find a debt settlement company which will not try to scam you. You just need to be careful with your selection.
  1. Some companies fail to explain the risks that come with their debt settlement programs. Many of the things you can expect though you can find in this article and some of them surely you can figure out on your own. Your debt settlement company is not obliged to simplify everything for you. Their job is to make your debt go away. Usually, they will fulfill their promises to you, regardless of whether they have told you everything or not.
  1. Some debt settlement companies claim that they can make your unsecured debt go away or that it can be paid for pennies on the dollar. Although, this is exactly how it works with a secured debt, it might go in a slightly different manner when it comes to an unsecured one. That involved a higher level of uncertainty and risks that unsecured debt has for the lender. An unsecured debt is simply said- a loan that is not backed up by any underlying assets. Your credit card debt falls under that category.
    The only reason someone would be willing to extend such a loan is because they expect a full repayment. That is why many unsecured creditors are not be willing to negotiate with your credit card debt settling company. They might even want to sue to get back what you owe them. That is very reasonable behavior and it should not surprise you. However, some debt settlement companies can actually help you resolve your unsecured debt. Follow your track record, talk with satisfied clients of your preferred debt settlement company and decide whether to believe their promises or not.
  1.  Some credit card debt settlement companies will request you to stop communicating with your creditor.That is because it is the standard practice. However, you may want to avoid a debt collecting company that takes that step without explaining to you what risks may come with it.Some of which may include you receiving unwanted debt collection calls, be requested to make repayments or even get sued which may affect your credit record sometimes. You want to be aware of the risks you are taking even when the debt collection company’s requests for you to stop communication with your creditors seem reasonable and necessary.
  1. Some credit card debt settlement companies may even try to promise you that they are making all debt collectors calls and managing lawsuits. Although it is possible that those companies have worked with your creditors in the past and have reached some kind of an agreement on debt settlement, it is usually a wise choice to avoid debt settlement companies that make such promises.
    For one thing, those promises are very hard to keep. They depend entirely on a third party’s behavior and a creditor may change their mind anytime before the debt is settled. Be smart and stay away from credit card debt settlement companies that try to sugarcoat the process for you. If you really want to stay out of trouble and out of debt, find a credit card debt settlement company which you can trust.

How to choose good credit card debt settlement company?

How to choose good credit card debt settlement company?

How to choose good credit card debt settlement company?

The most secure thing you can do is choose your credit card debt settlement company carefully. There are a few things you can consider:

Research
You do not want to go into business with a scamming company. You will spend a lot of your money in the processes of collecting the lump sum required by the program. Don’t just throw those away. You have two options- you can check the company with your state Attorney General or with your local consumer’s protection agency.

Preferably, do both. From the local consumer protection agency, you can learn if there are any  consumer complaint against the company you are thinking of working with. Moreover, your state Attorney General can provide you with another kind of useful information – whether the credit card debt settlement company you have chosen is required to be licensed in your state and if so, whether it is licensed.

Another thing we recommend you to do is to enter the name of your debt settlement company of your choice into search engines. There you can see what others have said about it. You can also find out if there are state or federal lawsuits against it for being part of scam schemes.

You can also request the company to introduce you to some of their previous clients or ask for such among your circle of acquaintances. However, bear in mind that the things you heard may not be true. It is the same with the opinions you find on the Internet. Most companies are aware their potential clients will do a background check on them. Therefore, they can purposefully add positive comments on their business through fake profiles. Be critical of the information you receive.

What are the fees involved when settling credit card debt?

  1. What are the fees involved?

    What are the fees involved?

       Bank account manager fee
    When you become part of credit card debt settlement program, you would be required to put money in a dedicated bank account. However, this account will be managed by an independent third party. You may expect to be charged for this service.

    You are still entitled to the interest from your money in the bank but that money would be used for payment to your creditors and for the fees you owe your debt settlement company. It is your account manager’s job to make repayments from your account. That is why you are paying him a fee for his service.

  1.    Credit card debt settlement company fee
    As mentioned above, you are not supposed to pay your debt settlement company in advance. You are only required to pay them after they have settled some of your debts. Even so, you are not supposed to pay them the full fee. They can only receive part of the fee for the amount of debt they have settled for you.

    How does that work? For example, you have ten creditors and your debt settlement company has reached a settlement with only four of them. Therefore, they can receive only a quarter of their full fee or 40%. That goes for each successful settlement they make. For example, they managed to negotiate two more of your debts, they are entitled to another 20% of their full fee.
    In some cases, the company’s fee is based on the amount you save through the settlement. Because they are negotiating for you to pay cents on each dollar you owe. In case you owe $10,000 and they manage to settle your debt for $8,000, you are saving $2,000. They sometimes would base their fee on this amount. This is known as “contingency” fee.

What information should your credit card debt settlement company provide you with?

 information before signing up for any debt settlement service

information before signing up for any debt settlement service

Important: You should receive the following information before signing up for any debt settlement service. It is important for you to have know in advance to be clear about what you are getting yourself into.

  1.    Price and terms
    The debt settlement company you have chosen must provide you with detailed information of their terms and conditions. That is what they will require from you once you become part of their debt settlement program. They should also explain how much they will charge you for each thing so you are clear about how much the full service will cost and decide whether you can afford it.
  1.    Results

    results

    results

    They should clarify what they can help you to achieve within a certain time frame.The debt settlement whole process could take approximately three to four months but it varies from case to case. It is your debt settlement company job to set a time frame. You don’t want to be left disappointed with unrealistic expectations.

  1.    Offers
    This means that before they reach a settlement with your creditors, you should reach a settlement with them. They must tell you how much money you should save before they go make an offer to your creditors. That amount is the sum you need to have in your special savings account as part of the debt settlement program.
  1.    Non payments
    The debt settlement company must inform you whether you are required to stop making repayments to your creditors and let you know how that can affect you.

Other information you should know:

–    Although they stay in a separate saving account, you still own that money and you are entitled to interest from the bank

–    Normally, you should be allowed to withdraw your money anytime without a penalty unless you have explicitly agreed to something else in your agreement with the debt settlement company. Otherwise, you would be a victim of theft and should seek legal protection. In any case, make sure you know what you are signing with the debt settlement company.

–    The account administrated should be a third independent party. He should not be affiliated with the debt relief company. Therefore, he is not entitled to refer fee. Make sure they are not charging you for such.

What are the tax consequences of being part of a debt settlement program?

 tax consequences

tax consequences

Although you are saving a lot of money by joining a debt settlement program, some of them may be considered income and taxable by the relevant authorities. This depends on your personal financial situation. What savings from the debt settlement program may be considered taxable?

In some cases, credit card companies may report your settled debt to the IRS. For taxing purposes, that would be considered income. There is one exception and that is the case of insolvency. If you are “insolvent”, it will not be considered as income. However, it is a complex issue and may be hard to determine.

It is recommended that you talk to a tax consultant to be sure you are classified under this exception. Insolvency occurs when your total debts are more than the fair market value of your total assets. A fair market value is an estimate market value that an average knowledgeable buyer would be willing to pay to an average knowledgeable seller on the market. This value should represent an accurate valuation or assessment of its worth.

What other debt relief options do you have?

  1.    Talk with your credit card company on your own
debt relief options

debt relief options

Depending on how good you are at negotiating, you may consider consulting your credit card company on your own. Remember, this can go wrong in many ways as there is no way for you to know how they may respond. The last thing you want is to get on the wrong foot with your creditors. Also, they may turn you down.

If you don’t pay your debt for 180 days, your creditor will write it off as a loss. After that, they may be unwilling to negotiate with you. That is because they are already at a loss and don’t have the interest to reduce your repayment. They might be better if they sue you for the full amount you owe them. On the other hand, a debt settlement company in most cases will be able to negotiate a better deal on your behalf.

  1.    Contact a credit counselor

Credit counseling organizations can advise you on how to manage your money if you believe advice would be enough to help you make your debt go away. Credit counselors will discuss your financial situation with you and come up with a plan. Although they work for non – profit organizations, it doesn’t mean their services are free. In many cases, their services will be neither affordable nor legitimate. Many credit counseling organizations charge high fees or encourage their customers to make “voluntary” contributions (that can lead you into more debt).

You should also check if the credit counseling organization is government-approved. The U.S. Trustee Program (part of the U.S. Department of Justice) has a list of all government-approved organizations.

  1.    File for bankruptcy
 File for bankruptcy

File for bankruptcy

Filing for bankruptcy has serious consequences. In fact, it can be one of the worst options. It will lower your credit score dramatically. Also, the filing process is hard and long. You are facing a repayment plan again – the only difference is that it should be approved by the court. It will also last longer from three to five years.
The only good thing is that after you have made all payments under the plan, your debts are discharged. Have in mind that you may not reach this point and find it very hard to make the required payments should you consider filing for bankruptcy.

There are also some specific requirements in the filing process. You must get credit counseling for six months before you can file for bankruptcy. It should also be done by a government- approved organization. There are many government fees you need to pay on top of varying attorney fees.

Filing for bankruptcy is the one thing you should try to avoid. Seek help from a professional credit card debt settling company instead.

Which option is best for you?

The financial situation for every individual is different. There are a couple of possible solutions for your current debt situation but you should bear in mind that everything comes with certain amount of risk and possible negative effects. Credit card debt settlement remains the easiest and fastest way to become debt-free by far.