Debt settlement is one option available to the consumer as a way out of their financial hardship.  Debt settlement deals with unsecured credit.  This unsecured credit can take the form of credit cards, medical bills and any other unsecured debt the consumer has incurred.

The consumer needs to realize there are two types of credit available to them. Secured credit means debt has some type of collateral backing -  your home, your car or in some cases, cash secured loans. The other form of credit is unsecured which is normally credit cards from lenders or retailers.

The unsecured credit is where the consumer has caused the majority of their financial problems.  The consumer has used credit card to purchase daily expenses, like their  groceries, gas, airline tickets, and on-line retail shopping. The credit card companies would offer points to the consumer to purchase items and give them reward points or points toward travel. In addition, the credit card companies would offer us new credit from higher interest rate cards to lower interest rate cards, if we transferred the balances.  It was like a shell game, moving balances from one card to other which allows us to have more credit.

 The one way to get out of debt is to look for a debt settlement company.  Debt settlement may not be for everyone. It requires the consumer to start saving money monthly until enough monies are available on the lowest outstanding balance credit card before the debt settlement company to begin negotiations.

Yes, there are drawbacks to this approach as there is to other options.  This is not an overnight fix it may take anywhere from 12 to 48 months. However, the first step is to discuss with a debt settlement company the ways in which they may be able to assist you out of debt. But if the consumer is really wanting to do something and get out of this financial hardship, call us today to discuss your options. 

Debt settlement is a way to manage your debt burden caused by extreme financial hardships due to loss of job, medical emergencies and out of control unsecured credit card debt. Debt settlement is one of the better ways to solve financial issued instead of filing for bankruptcy.  Bankruptcy is a very serious situation and has serious financial consequences.

Though the consumer can try to work with creditors to negotiate on they own most consumer use a third party, debt settlement companies. Most creditors will work with a debt settlement company to ensure receiving at least some monies from the consumer verses the consumer filing bankruptcy and not receiving any monies. 

When selecting a debt settlement company, the consumer should confirm information about the company:

·         Ask for a copy of the contract in advance to review

·         Length of time in business

·         Who is handling my account

·         History of the company

Remember, any debt settlement company that tells the consumer it can reduce its debts within weeks or wipe away the credit instantly. The consumer should avoid this type of company.  It may take a minimum of 12 months to negotiate that first settlement and up to 48 months based upon the outstanding balances owed by the consumer to the creditors.

A debt settlement company should explain to the satisfaction of the consumer all the steps involved in the program.  Here are a few of the steps:

• Start to deposit an agreed upon dollar amount into a established “trust account” each month for a certain period of time
• Once enough funds are in the account, the settlement company will negotiate with the creditors on your behalf.  Normally working on the lowest outstanding balance first and working they way up to the larger creditors.
• This negotiation agreement with the creditors can be from 50 to 60% of the outstanding balances and any additional fees
• Discuss fully with experienced staff on the extend of your debt

My Personal Finances and Debt Settlement

Do you have Credit Card Debt of More than $5,000?

“A budget is just a method of worrying before you spend money, as well afterward” Anonymous

The major question, you need to ask yourself can I work within a structured budget to get me out of my financial mess? If the answer is yes, then a debt settlement program may be right for you at this time.

By using a debt settlement program, you will be to stop the endless cycle of making only the minimum monthly payments on your credit cards and making no headway on your balances. This program has you saving a percent or set amount each month and as that balance grows, it allows the settlement process to being.

Here is an example:

As any example, if your current monthly minimum payment are at $750 and this is a struggle but you could pay $450 a month. Then it would take approximately 12 months to become debt free using a debt settlement program. Does that see too easy. Will it’s not! It will require a stead fast need to save and control your current spending. But by choosing a debt settlement program, you will be free of the constant worry of how do I pay my bills on time and get myself out of debt.

As you can see from the chart, you could be able to settlement for almost half of your outstanding credit card balance. You need to ask yourself, how long would it take to off of my credit cards by myself? If you make only the monthly minimum, you a basically paying only interest and very little principal. So it could take you more than 8 years to paid off your debt verses using a debt settlement program.

You have already taken the first step in recognizing the need and that there are debt settlement programs such as Debt Negotiation Zone that have specialist waiting to assist you. Call today 866.96.3.9988.

Henry Ford’s quote is right because every situation, we face needs to be viewed in small pieces.
You need to understand what credit scoring is and how it is used by lenders before considering debt settlement as a way out of your current financial situation. We need to break down what our credit score means and how it is used when measuring the credit worthiness of the consumer.
•    Do you monitor your score on either a monthly or quarterly basis?
•    Did you know that your credit score changes every month?
•    Do you know your credit score? The credit score range can be from300 to 850
•     Did you know that income is not considered by the major credit bureaus when calculating a credit score?
•    The lower your credit score, lenders may deny credit and charge higher interest rates
The credit score is a mathematical figure which takes into account, the  following factors but not limited to :
•    Number of accounts, either secured or unsecured
•    Length of credit history
•    Credit Limit
•    Highest Balance
•    Payment History
•    Usage
•    Public Records, i.e., tax liens, judgement, bankruptcy
One of the first question always asked is will debt settlement affect my credit score? Yes, in the beginning as your accounts start to go delinquent your credit score will drop.  However, once we start settling up your accounts and your debt ratio starts to improve, you will notice your credit score starting to go back up. Again, you should be aware that your credit score will change monthly whether you are in a debt settlement program or not.
A bankruptcy will be shown on your credit report for 10 year and will continue to drag down your credit score.  While delinquency will also affect your credit score but only for a shorter period of time. By using a debt settlement program, you will be able to start reducing your credit balances and will be showing lenders your willingness to pay your obligations.
As you paid off your debt, your credit score will start to improve and allow you to move forward.  You will stop having feelings of being so “lost” with your finances. Because you will now be in complete control of your financial future.

This information is of general interest and not legal advice.  If you need professional advice seek the services of a professional or attorney.

Do you have more than $5,000 in debt on more than 3 credit cards? One of your options is to consider debt settlement negotiations.
There are basically two types of debt - unsecured  and secured.  The debt which causes us the most problem is the unsecured debt on your credit cards.
Understanding how we got into this problem and finding ways to resolve the problem is the first step in giving you  a piece of mind.
The credit cards were flexible and easy to use for everyday expenses. But something happened along the way, I started just paying the monthly minimum and my balances continued to grow.  The interest rate  and fees increased on your credit card. That is no longer acceptable because you are drowning in debt.
It may be tough in the beginning to made concessions and accept the fact you have a problem.  But once you understand the problem and the solution to your credit card problem the easier your life will be for you and your family. This allows you to  get started placing the money into a saving on a monthly basis. You will begin to build up the monies needed to pave the way for the debt negotiations settlement process to work for you and your family.
An experienced debt settlement company has the resources and the ability to negotiation on your behalf.  They will work with you to structure a plan that fits your current financial situation.  The way for debt negotiation to be successfully is the consumer faithfully following the plan.  The financial plan may take as little as 12 months or more than 48 months depending on your outstanding unsecured debt position.

When you negotiate with a debt collector you are going up against a tough and seasoned professional. Following these tips can help take the advantage away from them and put it on your side.
Know Your Rights Before You Begin
The first thing you need to do is to educate yourself on what your rights are. Your first assignment is to learn about the Fair Debt Collection Practices Act. You can also get a free brochure on the rules of debt collection from the National Consumer Law Center. Call 617-542-9595 and ask for the brochure “What You Should Know About Debt Collection”. You may also want to contact your state’s Attorney General to see what the rules are in your state.  There are things that a debt collector can and cannot do. Just because you owe them money doesn’t mean that they can harass you mercilessly. When you know what your rights are and you emphasize to the debt collector that you know what your rights are, they are less likely to use aggressive collection tactics.
Tips For Successful Negotiation
•    Your first step is to prioritize your bills. No matter what the credit or debt collector says, the most important thing is to provide for your family’s necessities. It is silly to put yourself in a position where you can’t pay for your basic living expenses.

•    Have the collection company validate the debt that they say you owe them. This action alone might stop them in their tracks. Learn more about debt validation.
•    Calculate how much you can afford to pay and pay less. I would never promise to do anything you cannot do. Do not send post dated checks or agree to electronic payments from your bank account. Once they have your payment information, you must trust that the debt collector will have the integrity to take payments at the correct time.

•    Skip the sappy story. If you think telling them the circumstances that got you into the position that you are in will make a difference, it will not. They really don’t care. They really don’t have any sympathy; they hear the hard luck stories all day long. They just want you to pay them as much money as they can get out of you.

•    Absolutely do not give them any personal information. Telling them where you live and work could be a big mistake. Keep in mind they only care about one thing: getting money out of you. They will have no problem contacting you wherever they know that they can find you. Just stick to whatever the facts are concerning your case.

•    Always keep your cool. Bill collectors make their living by rattling your cage or putting fear into you. That is how they can get people to come up with the money. The truth is that there is not much they can do until they have a court order or judgment against you.

•    If you are able, tape your phone conversations and tell them you are. Most likely they will get out of line at some point. You can then use this as leverage against them. They don’t want any trouble with state or federal agencies.

•    Take good notes. Keep all your collection letters and keep good notes on all of the calls that you receive. You may want to keep a dedicated log book by your phone. Record the date, time and the person you spoke with. Also keep detailed notes about the conversation and what was discussed.

•    Get all proof of payments in writing. I would even suggest sending them a personal check with a release written on the back of it. So even if they do not send you anything, you have a cancelled check documenting that they have released the debt. I would write something like, “By endorsing and depositing this check, said creditor fully releases and discharges said person from any future claims regarding this debt and the debt is paid in full.” This would work fine. I believe that it is always smart to have a back-up plan.

•    Make sure that they update your credit profile as part of the agreement - get it in writing that they will amend their credit reporting records on your account

•    Agree to a negotiated payoff at the end of the month. Most collectors are paid at the end of the month. This is the best time of the month to negotiate the best deal.

It is true that owing money can be no fun, but it does not need to ruin your life. It’s just money. If you are in debt, the road to getting out of debt can be daunting. The sooner you start the sooner you can be debt free. I always loved this saying, “How do you eat an elephant? One bite at a time.” It is a cute metaphor but very appropriate for paying off debt.
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Once your credit cards have gone into collections, the fun can really get started.  Creditors and collection agencies can start hounding you and calling at all hours of the night.  If this is the case for you, a game plan for how to deal with them effectively may be in order.  You need to start educating yourself on what a creditor can and can’t do.  You do have protection under the fair debt collection practices act.  Don’t think you have to put up with abusive behavior from the collector.  They may be subject to fines if they are out of line.  Keep track of who is calling you and what they are saying.

1. Don’t talk on the phone to a collection agency. If you get on the phone with them they will try to intimidate you so they can collect more. Remember, the more they collect, the more they make.
2. Send a validation letter to the collector to confirm the debt.
3. Get everything in writing first before you open your checkbook.
4. Keep good records; don’t expect the collector to remember what you had agreed on.
5. Send all correspondence by registered mail.
6. Keep copies of everything
7. If you do call the collector, keep a log of whom and when you called.
8. Follow up a call with a letter.
9. Penalties and interest are typically made up amounts of many added on by the collection agency to increase profits.
10. Time is on your side. The longer you can keep them off your backs, the better settlements you can work out.
11.  Don’t be eager to settle. Take your time. If you are trying to buy a home and you need to have the delinquent account off your credit report, make sure they know about this. Ask them to remove the account from your credit report if you pay them in a lump sum. Remember the collection agency is not your friend, and don’t be intimidated by the creditors.  Usually your worst fears about what can happen won’t. I hope this information will save you thousands of dollars when settling your debts.

Most of us go into panic mode when we receive notices from bill collectors and collection agencies. I know I do. Although it is upsetting, my sense is that most of us are not aware of the risks associated with our unpaid debt accounts. Creditors have many options at their fingertips to get their money. This article is meant to ease your fear about your creditors and to put you in the driver’s seat as you get out of debt.
Debt Collectors Exploit Your Fear
The biggest tactic used in getting past due money is wage garnishment and seizure of property. This method is based completely on exploiting your fear. The collection agencies usually fail to point out that they need to go to court first to be able to do anything to you.  It is possible for a creditor to take you to court and obtain a judgment against you allowing them to garnish your wages and possibly put liens against your home. While this could happen, the chances are small that they would go this far. It is too much time and expense to try and collect from you in this way.
Take It Slowly and Get the Debt Validated My sense is that most of us jump too quickly with the collection agency in paying the debt that they are calling about. I can only imagine how much money has been paid unnecessarily out of reacting to fear. What’s not to believe when it comes to hearing from the collection agent’s threats of impending doom and gloom if payment isn’t made immediately?
Hold on however. If you get a call, take a breath, you have options. The first thing you need to do is debt validation. Make sure that it is a valid claim and that it belongs to you. Given my years of experience in the mortgage and debt settlement businesses, I have seen thousands of mistakes on credit reports and have concluded that the credit reporting system in the US is flawed. Ask for the debt to be confirmed in writing and ask for copies of where you signed the contract or agreement that caused the debt.
Check the Statute Of Limitations For Your Debt
You may also want to check the statute of limitations for your State. There are limits to how long debt against you can be collected. Contact the attorney general in your state for this information. My recommendation is to call them. If the debt has been on your credit report for over 7 years (in most cases), the derogatory and the collection related to it should disappear from your credit report.  If the debt has not been paid for 7 years, then it can no longer legally be on your credit report. You can challenge the item and it will come off. If the debt is removed from your credit and the statute of limitation is up on this debt, you should be in the clear. Bankruptcies can remain on your credit report for no more than 10 years.
What Are Secured and Unsecured Debt? Know the type of debt you have. It makes a difference in how you proceed with getting out of debt. There are two types of debt, secured and unsecured debt. Secured debt includes homes, automobiles, and taxes. Unsecured debt includes checks, student loans, personal loans, medical bills, credit cards and department store credit cards.
It is unusual for secured debt to be settled.  If you cannot pay these bills the creditor will most likely foreclose on your home or repossess the automobile. If either of these happens be prepared for the possibility of additional money being charged to you if they cannot sell your home or car for what you owe them. This debt you may be able to settle. With unsecured debts, there is nothing “attached” to the loan for repayment, therefore there is nothing for the creditor to repossess. With nothing to take from you that they can sell, the creditor is more likely going to settle this debt. Make sure to document everything in writing.

When you negotiate with a debt collector you are going up against a tough and seasoned professional. Following these tips can help take the advantage away from them and put it on your side.
Know Your Rights Before You Begin
The first thing you need to do is to educate yourself on what your rights are. Your first assignment is to learn about the Fair Debt Collection Practices Act. You can also get a free brochure on the rules of debt collection from the National Consumer Law Center. Call 617-542-9595 and ask for the brochure “What You Should Know About Debt Collection”. You may also want to contact your state’s Attorney General to see what the rules are in your state.  There are things that a debt collector can and cannot do. Just because you owe them money doesn’t mean that they can harass you mercilessly. When you know what your rights are and you emphasize to the debt collector that you know what your rights are, they are less likely to use aggressive collection tactics.
Tips For Successful Negotiation
•    Your first step is to prioritize your bills. No matter what the credit or debt collector says, the most important thing is to provide for your family’s necessities. It is silly to put yourself in a position where you can’t pay for your basic living expenses.     •    Have the collection company validate the debt that they say you owe them. This action alone might stop them in their tracks. Learn more about debt validation.
•    Calculate how much you can afford to pay and pay less. I would never promise to do anything you cannot do. Do not send post dated checks or agree to electronic payments from your bank account. Once they have your payment information, you must trust that the debt collector will have the integrity to take payments at the correct time.          •    Skip the sappy story. If you think telling them the circumstances that got you into the position that you are in will make a difference, it will not. They really don’t care. They really don’t have any sympathy; they hear the hard luck stories all day long. They just want you to pay them as much money as they can get out of you.          •    Absolutely do not give them any personal information. Telling them where you live and work could be a big mistake. Keep in mind they only care about one thing: getting money out of you. They will have no problem contacting you wherever they know that they can find you. Just stick to whatever the facts are concerning your case.              •    Always keep your cool. Bill collectors make their living by rattling your cage or putting fear into you. That is how they can get people to come up with the money. The truth is that there is not much they can do until they have a court order or judgment against you.           •    If you are able, tape your phone conversations and tell them you are. Most likely they will get out of line at some point. You can then use this as leverage against them. They don’t want any trouble with state or federal agencies.               •    Take good notes. Keep all your collection letters and keep good notes on all of the calls that you receive. You may want to keep a dedicated log book by your phone. Record the date, time and the person you spoke with. Also keep detailed notes about the conversation and what was discussed.           •    Get all proof of payments in writing. I would even suggest sending them a personal check with a release written on the back of it. So even if they do not send you anything, you have a cancelled check documenting that they have released the debt. I would write something like, “By endorsing and depositing this check, said creditor fully releases and discharges said person from any future claims regarding this debt and the debt is paid in full.” This would work fine. I believe that it is always smart to have a back-up plan.           •    Make sure that they update your credit profile as part of the agreement - get it in writing that they will amend their credit reporting records on your account          •    Agree to a negotiated payoff at the end of the month. Most collectors are paid at the end of the month. This is the best time of the month to negotiate the best deal.

It is true that owing money can be no fun, but it does not need to ruin your life. It’s just money. If you are in debt, the road to getting out of debt can be daunting. The sooner you start the sooner you can be debt free. I always loved this saying, “How do you eat an elephant? One bite at a time.” It is a cute metaphor but very appropriate for paying off debt.

There are ways to have a bill collector stop contacting you.  You must handle this in writing, alerting them that it is no longer permitted that they call you. Once they receive your letter they are not allowed to contact you again. This does not mean that you are off the hook. You can still be taken to court and sued on the matter. If you get taken to court, you could end up with a judgment against you for what you owe. This will then go on your credit report. Why it is a problem once the debt hits your credit report as a judgment is that most mortgage lenders will require this bill to be satisfied as it can impact a lender’s ability to give you a mortgage. The only way to get it off your credit report at this point is to pay it in full or settle for something less than the full amount due. While it is on your credit report, you credit will most likely suffer.
Debt Collectors Have Restrictions
If you have an attorney, the creditor must contact your attorney not you. If you do not have an attorney, a creditor may contact other people, but only to find out where you are living. In most cases the debt collector cannot tell anyone besides you and your attorney that you owe money.       If you do not believe that you owe a debt, and you file a dispute, the collection agency has 30 days to provide proof that a debt does exist and that you owe it. If they can provide proof then they can continue to try to collect on it. At no time during the collection process can a collector use threats of violence, publish you in a list of other debtors, use profanity or obscene language.       In addition, they cannot give false credit information to anyone. This includes the credit bureaus. They cannot send you anything that tries to look like an official document for a government agency or court. The collectors are not allowed to use false names. A collector may not engage in deception, threaten to take your property, deposit a post dated check early, collect more that you owe or contact you with a postcard.       If you feel that your rights have been violated you can take a collector to court within 1 year of the date that you feel that the law was violated.  If you think that you have been treated unfairly you can contact the attorney general in your state to help you determine your rights.

If you have borrowed money on credit cards, owe some money on a personal loan, borrowed money from a bank or are paying a mortgage, by definition you are a debtor. If you get behind on paying your creditors or go into collections, you can be contacted by a debt collector. Yes, you did borrow the money and yes the creditor wants it back but they do not have free rein to harass you.

Know Your Rights as a Debtor
The last I checked in this country there is no debtors’ prison. There are consequences for not paying your bills but you do have rights as a debtor. The Fair Debt Collection Practices Act offers you many protections as a debtor. The Act states that a creditor must treat you fairly, and it strictly prohibits certain tactics in the collection of a debt. Keep in mind, however, that this consumer protection does not erase any legitimate debt that you have.

The types of debt covered are family, personal and household debts.  This would include money borrowed to purchase a car, credit card, charge accounts and medical bills. A debt collector is defined as any person who regularly collects debts that are owed to others. Third party debt collectors, collection agencies, and attorneys also fall into this category.
Dealing With Debt Collectors
A debt collector has many options when it comes to contacting you about the repayment of a debt. They may contact you by mail, telephone, fax and telegram. A debt collector is not given free rein to contact you whenever they feel like it. They are allowed to contact you from 8 am to 9 pm unless you agree to be contacted outside of this time period. A debt collector is not allowed to contact you at work if they know that your employer does not allow such communication to take place during work hours. All you have to do is tell them to not call you at work the first time they call you and they must stop calling you there.

With the onset of the credit crunch in 2007, millions of people saw their mortgage rates and their mortgage payments skyrocket.  Home foreclosures have hit new records across the country.  The credit crunch caused other impacts in the financial markets as well.  As the economy began to slow, consumers began to run into problems paying their unsecured and credit card debts.  Defaults on credit cards have reached an all time high according to MBNA.  Unfortunately, once you are in financial hardship there are not too many great choices in terms of getting out of debt.
How Does Debt Consolidation Work?

One option is debt consolidation, which will put all of your bills into one payment and possibly get your interest payments down.  Often times the payments are not much different than they were before the problem started.  Many people would like to take this option but they just can not afford it.

Facts About Bankruptcy
Another option would be to file for a Bankruptcy.  This would give you two options, one would be a Chapter 13 and the other would be a Chapter 7 bankruptcy.  A Chapter 7 is total liquidation which means that the debt is completely wiped out.  This can be very hard to get in light of the new bankruptcy laws.  The other option is to file a Chapter 13 bankruptcy.  A Chapter 13 does not wipe the debt away; you are basically just doing a debt restructure.  You will have to pay some of what you owe back.  This is up to the U.S. Bankruptcy Court to decide however.  Both bankruptcy options will have long lasting negative effects on your credit report and impact your FICO score for up to ten years.
What Is Debt Negotiation?

The other option is to do debt negotiation, or otherwise known as debt settlement.  You should only consider doing a debt settlement if you are unable to keep up on your bills (already behind on them) and you have determined that debt consolidation, Consumer Credit Counseling, or debt management programs are out of your budget.  A debt settlement program can have you out of debt in less than 36 months with no negative long term effects to your credit. You can also save yourself a lot of money.  The average debt negotiation program can save you 40-60 percent of what you owe your creditors.

I would like to point out that debt negotiation is not a free pass to dismiss paying your bills.  If you think that you are going to go out and charge up a storm to only put yourself in a program, you may be setting yourself up for fraud.  A reputable debt settlement firm would not take you on if the majority of your credit card debt is new.  Most people who enter a debt negotiation program have either lost jobs or had catastrophic medical issues to deal with.  People that do register for a debt reduction program do have integrity in that they want to avoid a bankruptcy.  They really do want to pay their bills.  If they did not want to, they would just do nothing.  To most consumers a bankruptcy is not an honorable solution.  People know that they borrowed the money and most feel an obligation to make some kind of amends with their creditors. Use Credit Wisely

My best advice is to do real planning when it comes to taking on new debt.  When you are going to make a purchase with credit you must be very clear as to what the impact of the new debt will be on your life.  It is an obligation and it is something that once you make it, there is no turning back.  What may seem like a good idea now may be a disaster in the future.  Make a budget and know what you can afford to do.  I know that we all want things but from my own experience I would rather have piece of mind than a bunch of junk in my house that I have to worry about paying for.  Debt Free is the way for me.  That is my mantra.  Try it out, it might help you sleep at night.  My goal is that you are happy and prosperous in your life.
Written by Debt Free Dave who has been in the mortgage and consumer finance business for over 10 years. He has a Finance and Real Estate degree from the University of Arizona. This Article is designed to be of general interest and should not be considered legal advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.