You’ve been putting it off and putting it off, but your debt problem won’t get better unless you do something. In fact, it will get worse. You’ve heard a bit about debt relief and think you might be a good fit, but you’re unsure what it’s about. Here’s how credit card debt relief programs work.
What is Debt Relief?
Debt relief, or debt settlement, as it’s sometimes called, is when you pay a company to see if your creditors will let you resolve your accounts for less than what’s owed. It’s a proven strategy since bankruptcy is your other option and if you file that, your creditors get zilch. Your creditors know this.
How Does Debt Relief Work?
First off, credit card debt relief programs are for those who, even if spending’s cut drastically, can’t see themselves debt-free within five years. Before enrolling in a program, find out from the company you’re interested in what their minimum unsecured debt level is. Such levels can vary among companies.
If you decide to proceed, the company will go over your finances and your options. Then you’ll set up a dedicated savings account, from which your settlement funds will be derived. You first need to save a certain amount – the company pre-determines the total – then negotiators will work with each of your creditors to see if they’ll accept a one-time payment in full to satisfy your obligations.
Most companies will charge you a percentage of each debt it settles, Others will charge a percentage of the debt the settlement eliminates.
Are There Risks?
Your credit will take a hit until your debts are settled and you’re back on your feet. That’s just the nature of the process. But your scores aren’t stellar now anyway and besides, they will improve once the program is completed.
You also want to make sure you choose a legit company. There are some unscrupulous actors out there who are more than happy to take your bread but may or may not settle a single debt. Some companies will string you along while your debt continues to grow, while others may take your money and run.
Note, too, that the Internal Revenue Service generally considers forgiven tax as income unless you qualify for an exception.
What About Scams?
Look out for companies that ask you for payment up front – that’s illegal. Also, established, reputable companies are forthcoming about fees and services, and when you can expect to finish the program.
In addition, stay away from companies that “guarantee” your settlement success. While the odds are great that you will be able to settle, there are no certainties in negotiations. You should also run the name of the company you’re interested in by your state’s attorney general, as well as your local consumer protection agency, to see whether there are complaints.
Do make sure the American Fair Credit Council and the International Association of Professional Debt Arbitrators accredit the company you’re interested in.
In general, to avoid scams you need to do research. The more you know about a firm, the less likely you’ll be ripped off. You should also get everything in writing, including all the details. That way you’ll have recourse should something go left. Agreement terms should be as clear and concise as possible.
Now you know how credit card debt relief programs work. The financial strategy has rescued scores of consumers like you from burdensome debt. All you need are patience and diligence. Make the call today.