More often than not, debtors find themselves unable to meet their credit obligations due to excessive outspending of their income. This is evident when payments fall behind by several months or creditors begin to call to remind them of the overdue installments. At this time it is prudent for the debtors to consider a debt settlement plan to regain control of their spending lifestyle.
They can either choose to engage the creditors on their own to reduce outstanding debt and agree on a payment plan or do so through a professional debt arbitrator. If a debtor decides to do it by themselves, they will have an upper hand in negotiating for the reduced amount. Adopting a credit repair approach can be helpful in ensuring that they succeed in clearance of outstanding dues. This can be achieved by taking stock of mistakes made in credit usage and correcting them as well as saving diligently.
However, the do it yourself consumers miss out the benefits of an arbitration attorney which include proper legal representation, guidance in signing agreement documents, excellent negotiation and avoidance of harassment by creditors.
The choice of an arbitration attorney is far much sensible than engaging the creditors by oneself. In this case, the attorney will engage the creditors on behalf of the debtor and agree on a reduced amount to be paid as the settlement of the total amount owed. The debtor then remits monthly installments to the attorney who deposits the funds into a trust fund account, usually owned by the debtor, until the last payment is made, usually within a period of 12 to 36 months. The attorney then takes his fee and remits the balance to the creditor. The creditor then advises credit bureau agencies to update debt status as settled.
Forgiven debts are considered as taxable income and consumers are required to remit taxes on them. In the event that a debtor is able to prove their bankruptcy on the day just before the debt is settled, then they will be accorded an equivalent tax relief. Those who file for bankruptcy may not pay a single penny of the outstanding dues or even the relevant taxes but suffer dire consequences as far as borrowing is concerned.
Consumers with several unsecured facilities like personal loans, credit card balances and outstanding utility bills can consider credit consolidation services where all facility are amalgamated into one manageable monthly installment. The arbitrator then pays off respective creditors every month after deducting their fees.
With several companies offering these services, it is important for consumers to know how to choose good companies while avoiding scams that would eventually land them into more debts. These are characterized by their promises to give discounts on their products, an aspect that makes offering these services on a multi-level marketing platform a tricky affair. Legitimate players in this industry are registered with the Better Business Bureau (BBB) and their track record of handling these cases is available. One should choose a service provider with a high success rate, who is licensed, registered with the BBB, charges reasonable fee and discloses all their policies, especially the refunds and fee policy.
Though debt settlement does help debtors get control of their credit life, it does not necessarily improve their credit score. However, if used well, it can help a lot of people get out of debt. It also helps creditors recover substantial monies which could have been otherwise written off.