Setting Ground Expectations When Your Debt Is Sky-High

The proverbial writing is on the proverbial wall. You’ve fallen behind on your credit card payments. Worse, you’ve actually missed a few. Your interest rate has now been raised to Empire State Building proportions. What’s more, the tacked-on fees have made your balance higher than ever—even though there’s no room on your cards to even charge any more.

After reviewing the potential solutions, you’re thinking debt settlement is the way to go, but you’re wondering what to expect. Setting ground expectations when your debt is sky high is absolutely key to dealing with it successfully.

Here’s what to expect when you decide to go with debt settlement.

What Is Debt Settlement?

Also known as debt relief or debt negotiation, you’ll endeavor to settle each of your debts for significantly less than the outstanding balances due. Rather than paying your creditors monthly as you’ve done in the past, you’ll make deposits into an FDIC-insured escrow account to save up enough money to make settlement offers to your lenders.

When you work with a professionaldebt relief company, its agents will negotiate on your behalf with your lenders to get them to accept these payoffs. This process starts once the account has accrued enough cash to execute deals upon approval. You retain complete authorization over the account. Cash is disbursed only with your say-so.

How Does the Process Begin?

The first step with a reputable settlement company is an assessment of your situation. They look at your income, your expenses and your payment history to see where you are financially. After all, there might well be a different solution with a more favorable outcome for you. If it is determined settlement is indeed your best course of action, the agent will help you create a customized, affordable payment schedule to build up your settlement fund.

What Do I Need to Qualify?

Exact dollar amounts vary by company, but the most reasonable ones will work with you if you have $7,500 in outstanding debt or more; some require at least $10,000. Your debt must be unsecured in nature. Obligations backed by collateral like cars, boats and houses cannot be negotiated. If you can’t make your payments on those debts, the lender will simply repossess the item. Credit card debt, medical bills, private loans and private student loans (in certain cases) are eligible for relief. Public student loans are ineligible.

What Will It Cost?

In most cases, you’re looking at anywhere from 24 to 48 months in time, depending upon how quickly you can amass the cash needed to satisfy settlement agreements. Most people in your situation realize savings of up to 35 percent and pay fees averaging 21.5 percent. With that said, no legitimate firm will request compensation from you for negotiating on your behalf until a settlement agreement is reached to which you agree, and payment is made to the lender.

OK, So That’s the Good, What’s the Bad?

There are no guarantees. Creditors can always refuse the offers. However, most of them realize this could push you into bankruptcy, in which case they might get nothing at all. You should also know forgiven debt can be considered income by the IRS and you could be taxed upon the amount your creditor foregoes. Additionally, fees and interest continue to accrue while the process in in motion. Further, collection calls will likely continue until settlements are reached.

How Can I Know a Company Is Honest?

Wherever money congregates there will always be people willing to work harder to steal than earn. Before you agree to sign with a company, look for the following traits:

• A long track recordof negotiating settlements, ideally 10-plus years.
• Free consultationsbefore you enroll in the program. Anybody trying to sign you up before they review your situation is only interested in helping themselves.
• Professional, educated staffwith certifications from highly regarded organizations such as theInternational Association of Professional Debt Arbitrators(IADPA).
• Accreditationby organizations such as the American Fair Credit Council.
• Positive reviews and testimonialssuch as this Freedom Debt relief reviewusually signal the people with whom you’re talking will work in your best interests to help you get your finances back on track.

Setting ground expectations when your debt is sky high will go a long way toward making your debt negotiations experience a positive one. If you go into it with the above information in mind, you’ll know exactly what to expect.