Sunday, August 19, 2007

Debt Settlement

It is very difficult to have a big amount of debt. You can hardly sleep at night thinking of a possible way to pay it. You can not think logically and rationally when in this situation.
There are many choices to solve debt. It can be through debt consolidation loan, debt settlement, self repayment plan, credit counseling, cash out refinance, retirement benefits, home equity loans, credit union, insurance, credit cards and bankruptcy.
One of the best among these debt solutions is the debt settlement or debt negotiation. It is also known as debt arbitration. This solution allows an agency to negotiate with the creditor to request for a lower interest rate for the debt. The agency will also ask the creditor to allow a certain period of time for the debtor to save for a full payment of the accumulated debt.
Debt amount can be reduced from 50% to 60%, depending on the amount the creditor will agree.
Debt settlement is usually offered to people who are near bankruptcy or those with a big amount of debt. It is not allowed for people who are financially stable. Instead a legal action is made with these individuals.
Here are several tips that you might want to consider when applying for a debt settlement.
First, you have to talk with your creditor and inform them that you would like to avail for a debt settlement because of reasons like sickness, bankruptcy or failure in business. Always record the basic information of the person that you talk to.
Take note of the arrangement that you will make. Be particular with the dates of payments and the number of installments to be completed. Some creditors request for a checking account draft. Make sure to have a written agreement after the deal is made so hat you will have something to show in case a problem arises.
Some creditors do not allow settlement unless you can show them some funds. This can change from time to time, still depending on the agreed terms for the settlement. Do not pay anything until you haven't finalized any contract with the creditor.
For settlements amounting to more than $599, you need Form 1099. This is required to be submitted since it will be added as your income and it will be added to your taxable amount for the year.
Certifications indicating your zero balance will only be released 30 days after your final payment is made.
It is also important to note that not all types of debt are possible for debt settlement. Credit card bill and medical bills are the only once accepted. Other loans such as car and housing loans are not allowed because the creditors can take those properties when they are unable to pay. The amount should also within the range of $7,500 to $10,000 but some other companies allow any amount below this.
There are some arguments with debt settlement. Other companies do not agree with this form of debt solution because they believe that more are stuck with their debts than getting out of it. Damages credit, increased collection calls and possibility of lawsuits are some of the objections for a debt settlement.
With regard to damage of credit standing, it says that once the borrower is saving for the full payment, he can no longer afford to pay for his other dues such as credit cards because he is indeed experiencing hardship with money. Whenever he fails to pay, he is reported to the credit bureau, giving him bad credit standing.
Another is the increased collection calls. Whenever a person fails to pay for his payments due, he will again added to the number of people the companies are calling. It doubles the work for the company. And another is the possibility of lawsuit if the borrower fails to pay for his debts.
Being debt-free is a difficult task as long as you do not have self-discipline. You can only help yourself if you believe in what you are doing. Whatever way you want to settle your debt is acceptable as long as you can do it.
Remember that there are advantages and disadvantages for every debt solution that is offered to you. You just have to make sure that you weigh it well.

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