Is it a Good Idea for Bucks County Residents to Settle Debts?
As the economy continues to struggle there are going to be plenty of debt collection agencies scrambling to make settlement offers. They will present these offers to you like they’re offering you an incredible deal.
“You owe $350,” the letter will gush. “But if you pay us $285.72 we’ll consider the whole debt settled.”
Does it make sense to respond to these letters? Does it make sense to try to negotiate with debt collectors to get them to accept settlements?
Will the debt settlement help you?
Debt settlement can help in a few specific circumstances. Usually this helps when you have a handful of debts and debt collectors you’d like to get off your back, and you have a lump sum of money that you’re ready to spend on that purpose. You’ve decided this is the better, faster, cheaper option than bankruptcy.
It works only when the debt has gone to collections, so you are already consciously aware that this is not preserving any assets. The debt is unsecured and old enough that it’s already been written off.
In this case, you basically achieve the goal of becoming debt free, especially if these are the only debts you have left. You get out a little bit cheaper than you would have gotten out before, and you get some peace and quiet.
It does not help if you’re drowning in debt. It doesn’t help with anything that still has monthly payments. It won’t help you get out of a repossession or a foreclosure. All it does is put an end to collection calls.
Note: debt settlement will not improve your credit. The words “legally settled for less than the full amount” will appear on your report and your score will go down.
Is it possible to negotiate your own debts?
Yes. You do not need the help of a debt settlement firm to settle your debts. Debt consolidation companies charge you heavy fees to do the work you could easily do yourself. There are a lot of scams out there.
In reality, if you call any collection agency and offer a settlement at 60% to 80%, they’ll probably accept it or at least make a counteroffer. Obviously if they’ve already sent you an offer you can just take it.
When is bankruptcy a better option?
If debt settlement won’t end your financial problems, or if you’re concerned about your credit report, then bankruptcy is the way to go. Bankruptcy tends to raise your credit score rather than lowering it, and it makes the debts go away completely.
In reality, there’s almost no advantage to paying any debt that’s gone to collections. The original merchant or medical facility has already been paid through tax write-offs. You might feel a moral obligation, but it won’t help you improve your life.
If you’ve only got a little money to do one or the other, declaring bankruptcy may be the way to go. Oddly it takes far less time to recover from bankruptcy than it does for having a “settlement” on your credit report…or several settlements.
Not sure? We offer free consultations so you can find out. Contact our office today to schedule yours.
☑ Been paying credit card balances that seem to never go down?
☑ Lost your job and are now having trouble keeping up?
☑ Attempted to work out a payment arrangement to no avail?
☑ Been notified of a mortgage foreclosure action?
☑ Been denied for a mortgage or other line of credit?
If the answer to any of these questions is “yes” then bankruptcy may be an option that you should consider.