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Why Does Debt Settlement Work In 2012?

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If you are looking for one of the fastest ways to resolve your credit card debts and medical bills you should take a look at debt settlement, also known as debt negotiation. It has worked in years past and it will continue to work in 2012 and beyond.

Why does debt settlement work?

Debt settlement is an alternative to bankruptcy. However it is better than filing bankruptcy for both you and the lender. Let’s look at an example from the corporate world to see why.

American Airlines just filed for bankruptcy protection to help it shed some of its debts. In the process the shareholders equity is wiped out and the stock is essentially worthless.

If the shareholders had the option of getting 25%, 35% or even 50% of their investment back instead of zero don’t you think they would have taken it?

This is what happens when you use negotiate with your creditors to reach a fair settlement of your debts before you are forced to file bankruptcy. You avoid a black mark on your credit report for 7 to 10 years, you get to reduce your credit card debts and medical bills by as much as 75% and sometimes more, and your creditors are satisfied getting something back on your account instead of having to write off the full balance as a total loss.

This is why debt settlement still works in 2012. People just like you are struggling every day with job losses or work reduction, medical bills, back taxes, student loans, and a sluggish economy.

The major credit card banks are aware of this and will work with you to settle your unsecured debts once you are about to file bankruptcy. They will accept pennies on the dollar instead of losing your entire balance as a bad debt.

They won’t work with you if you are current and making at least the minimum payments each month. They will only work with you once you have demonstrated a financial hardship and shown you are unable to make your payments each month for at least 4, 5 and 6 months.

At the 6th month mark that is when they are forced to write off your account as a bad debt and take the loss on your account. It is at this point that you can make a settlement offer and stand a good chance of it getting accepted.

You can do it yourself or you can hire a debt settlement company that will do it for you an a contingency fee basis – meaning they will only get paid if they deliver results.

Filing bankruptcy is a last resort option and has terrible consequences on your credit reports and credit scores. Take a look at what debt settlement and debt negotiation have to offer you before you file.

Debt settlement works to offer you debt forgiveness without the negative mark of filing for bankruptcy.

You can start by getting a free confidential debt analysis and see how much you can save

Know the ways to settle credit card debt by yourself

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In the face of global recession, consumers fall behind payments on their credit card bills. In this situation, when they have multiple debts then they opt for credit card debt settlement programs. But with the rising problem of debts, there has been a remarkable increase in the growth of scam settlement companies. These companies take advantage of the vulnerable debtors to swindle money without providing them with suitable solutions.

But you can easily settle your own debts without turning to a settlement company with a few simple steps given below

1. If you are keen to settle your debts then make sure that you convince your credit card company to lower the outstanding balance. Once the company accepts your settlement offer, ensure that you save a considerable amount to pay off the company in lump sum. Paying a large amount to the company will increase you chances of a successful negotiation.

Your negotiation proposal should be worth more to your creditor than the profit he will get from selling it to collection agency or claiming the debt as a tax loss.

2. Inform your creditor regarding your financial crisis and tell him that you will be unable to pay off your debts. Now approach the creditor with a debt settlement offer, then it will be easier for you to negotiate. Tell the creditor that you are willing to make a large payment if he agrees to lower the outstanding balance.

3. While negotiating with the creditor on the owed amount, ensure that you ask your creditor to update the credit report as “paid” rather than “settled”. With a “paid” note on your credit report, you will not have problems applying for loans in future. You can request the creditor to remove the late payment entries from your credit report for defaulting on your payment. But the chances are high that the credit card company may not agree to remove the late payment entries from your credit history.

So, settling your debt will be an easy task if you can avoid the hassles of dealing with a scam settlement company. It will be much economical if you follow the above mentioned guidelines.

Does Debt Settlement Affect Your Credit Score?

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Even though debt settlement can help you eliminate your unsecured credit card debt in a matter of months, you may be concerned about the effects it has on your credit report and credit score.

And this is a very valid concern because so much of your financial life is affected by what is in your credit report and your credit score.

The short answer to the question does debt settlement affect your credit score? is yes.

35% of your credit score is determined by your payment history.

Once you start missing payments on your credit cards your credit score will drop.

Good FICO Credit Score Before Debt Settlement

If you start with a 700 credit score, at the end of your debt settlement program, you could end up with a 500 or below credit score.

Bad FICO Credit Score After Debt Settlement

That’s the bad news.

The good news is you will be out of credit card debt.

So here’s a question for you, would you rather be out of $43,000 in credit card debt in less than one year or would you rather take up to 46 years to pay off $43,000 of debts making minimum monthly payments?

Not to mention the $66,000 in interest charges you pay over that 46 year period.

Would you rather have a good credit score or would you rather be out of credit card debt?

Yes debt settlement hurts your credit report and score but the effects are temporary.

Once you become debt free, your debt to income ratio is lower and it will look better to potential lenders.

Also, once you are credit card debt free, you can start rebuilding your credit report and have a good credit score in about two years.

That’s much quicker than recovering from bankruptcy.

If debt settlement is to work for you, you have to decide if you would rather be out credit card debt or maintain a good credit score because debt settlement does affect your credit score temporarily.

-Adam

When Does Debt Settlement Not Work?

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Hello –

We’ve already answered the question does debt settlement work, how debt settlement companies work, and how debt settlement works, today we will discuss situations when debt settlement does not work.

Credit Card Debts Past Due

The success of any debt settlement program will be dependent upon your creditors willingness to negotiate and settle with you. If your credit card company has a policy of not offering any settlements then you will not be able to settle with them in most cases.

What you can choose to do is wait until they write your account off or do a charge-off and deal with a debt collection agency or a debt purchaser. This is known as the second and third stage of the debt collection process. This usually occurs after six months of your account being delinquent.

Keep in mind however, the longer you go without settling your account the likelihood of it being sued by one of your creditors increases.

Just because one creditor refuses to work with you does not mean all the others will. You may just have to get on a hardship plan with one creditor and settle all the rest.

Doing this will still result in significant savings on your debts.

Another instance where debt settlement may not work for you is if you are unable to build up a settlement fund.

If you do not have the money to offer to your creditors when they are ready to settle, you will not be able to take advantage of their settlement offers.

You must maintain discipline and put aside as much money as possible into a settlement fund to have ready when your creditors are offering you a 50 to 60 to 75% discount on your credit card balance.

Cut down your expenses as much as possible during the 6 to 12 month period you are trying to build up a settlement fund.

That’s all I have for today.

-Adam

How Do Debt Settlement Companies Work?

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Just how do debt settlement companies work? And where do they get all the money to advertise on national TV all the time? Find out if it’s better to use a debt settlement company or if you can settle your credit card debt yourself.

The debt settlement company will make big promises such as reducing your unsecured credit card debt by 40 to 60%, eliminating debt collection calls, and having you debt free in 36 to 48 months.

And what is the charge for all these wonderful services?

Usually it’s around 15% of your total outstanding debt and most of it is due up front before you see any results from their services.

The FTC is currently reviewing the practices of a lot of debt settlement companies and will soon decide on whether or not to eliminate the upfront fees charged by most debt settlement companies.

In the past, debt settlement companies used to work on results. They would get paid when they were able to successfully negotiate with your creditors and get your balances reduced.

Now, it’s rare you will find a debt settlement company willing to offer their services on a results basis.

So what do the debt settlement companies actually do for you?

Once they sign you up, they will establish an automatic draft out of your checking or savings account which will start paying their fee and maybe putting some aside in your settlement funds.

They will direct your credit card companies to contact them for questions about your account.

And after they have enough money in your settlement funds they will try and work out a deal with your credit card companies.

The only problem is that most of the money you are paying for the first 6 to 12 months is paying only for the debt settlement company’s services and not building up a settlement fund.

This is a big problem because during the first six months you become delinquent on your credit cards you will usually get some of the best settlement offers from your credit card companies.

Working with a debt settlement company is also likely to  increase the likelihood of you getting hit with a lawsuit from one or more of your credit card companies. This is mainly due to some of the unsavory practices by many debt settlement firms.

This is how debt settlement companies work.

While there may be some benefits to using a debt settlement company, there is nothing they do that you cannot do yourself. You can negotiate and settle your credit card debt on your own with each individual creditor and get the best settlement offer possible.

You can also minimize the likelihood you get sued by any one of your creditors.

You also save thousands of dollars which you would normally have to pay to a debt settlement company to work on your behalf.

You can learn everything you need to know about how debt settlement works and how to get the best settlement offers from your creditors using the Zipdebt program.

And it won’t cost you anywhere near what a debt settlement company would ask for their services as their fee.

Thanks for reading,

– Adam

How Debt Settlement Works

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In the last post, I answered the question “does debt settlement work.” Today, I wanted to explain a little bit more of how the process of debt settlement works.

As you fall behind on your credit card payments, your creditors will continue to hound you with phone calls and letters urging you to make a payment on your account or you will fall further behind and negative information will be reported to your credit report.

From the moment you fall behind your interest rate is jacked up to around 30% and you get hit with a $39 monthly fee every time you are late.

Sooner or later, they will also reduce your credit line to just over your current balance so they can hit you with another $39 over the limit fee as soon as your balance goes over the limit.

For the first three months, your creditors will try and get you on a payment plan or try to get you to pay something on your account.

You cannot negotiate a debt settlement at this time in most cases.

When you are 4 to 6 months behind, your creditors will then try to minimize their losses on your accounts and be open to settlement.

Their statistical models show that the farther you fall behind the less likely you’ll ever make a payment to them again.

This is why they will be willing to negotiate with you and reduce your balance for a lump sum payment through a settlement offer.

They would rather get something paid on your account instead of taking a total loss on your account.

This is when you can settle your credit card debts for 60 to 75% of what you owe.

That is how debt settlement works. You can do it yourself with a little coaching and information from people who have done it before.

You do not have to use a debt settlement company to help you with this. Using a debt settlement company can only drag out the process of debt settlement and increase the likelihood of you getting sued by your creditors.

You can learn everything you need to know about debt negotiation and debt settlement with the Zipdebt program.

I used it to settle over $43,000 worth of credit card for just over $13,000.

You can use it to drastically reduce your unsecured credit card debts in less than 12 months.

I’d highly recommend you check it out.

-Adam

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Does Debt Settlement Work?

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Hello-

After having settled $43,250 for only $13,054 on my own, I can categorically state that debt settlement does work.

It’s no secret that people are hurting financially these days.

That’s why you see so many commercials these days offering debt relief services to help you reduce and eliminate your credit card debts and get your life back.

NEW YORK - MAY 20: In this photo illustration...
Image by Getty Images via Daylife

The credit card companies want you to do everything you can to keep paying them without knowing about hardship programs like debt settlement that can relieve you of your many financial burdens.

But when you cannot afford to keep up with your monthly bills or an unexpected medical bill or job loss comes around, you do not have to resort to filing bankruptcy.

In my situation, it only took one month for everything to come crashing down.

Everything was running along smoothly, all the bills were getting paid and everyone was happy.

Then I got a bill in the mail I was not expecting, an unpaid hospital bill from my daughter’s hand surgery several months prior.

Then my student loans came out of deferment after 2 years. So that added another $200 a month to my monthly bills.

Then I found out I owed over $8,000 to the IRS. So that added another $250 a month to my monthly bills.

So that was another $500 a month in new bills that I could not afford to pay anymore along with all the other credit card bills, life insurance, car insurance, renters insurance, rent, and car loan.

For the first time in over 7 years, I missed a credit card payment.

And boy did the phone calls start.

At one time, I had over 20 missed calls on my phone before noon.

It wasn’t until I was several months behind that I learned about debt settlement and how I could negotiate with my creditors to pay a reduced amount and get the entire balance wiped out.

The debt settlement companies that I learned about promised 40-60% reductions in my credit card balances over a 36 to 48 month period.

What I discovered on my own that negotiating with the credit card companies on my own, I could have my entire balances reduced by 65 – 75% and totally eliminated in less than 6 months.

You can do it yourself debt settlement and talk and negotiate with your creditors and save all the fees the debt settlement companies want to charge you.

You can also minimize your chances of getting sued by working with one of those debt settlement companies you see on TV.

Yes, debt negotiation and debt settlement really work.

NEW YORK - MAY 20: In this photo illustration...
Image by Getty Images via Daylife

You can reduce your balances on your own.

It is not a scam.

There are several home study courses and books that will teach you all you need to know about settling your own credit card debt.

Trust me I bought and read them all. I learned as much as I could so I could save the most money. Spending a couple hundred dollars on how to settle your debt books was worth it when I finally saved over $30,000 on my credit card debts.

And I got out of the financial crisis I was in.

If you find yourself struggling to keep up with your monthly payments, if you are going through a financial crisis due to an unexpected job loss, reduction in income, unexpected medical or hospital bill, then debt settlement may work for you.

The course you want to check out is called Zipdebt. In there I got the most comprehensive information about how to settle my debts, how to deal with the taxes on the cancelled debt, how to deal with the debt collection calls, how to get the best settlement, and how to not get sued by my creditors.

I encourage you to check it out if you need to get out of credit card debt that you can no longer afford to pay.

It may be one of the best things you ever do to improve your finances.

Thank you for reading my story and I wish you the best.

-Adam

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