When you are in debt, you have several options. Bankruptcy, consolidation, settlement, credit counseling, and ignoring the whole mess are all options. What is the best one for your situation? In this article, we’ll take a look at debt settlement, otherwise known as debt resolution.
What is Debt Settlement?
In debt settlement, you and your creditors reach an agreement in which you pay less than you owe. A debt settlement company like Pacific Debt can help you to settle your credit card debt and learn to live debt free.
How Do I Settle?
Debt settlement works best if you are NOT current on your payments. If you are making payments on time, creditors may assume that you are capable of paying back your debt.
Once you convince them that you are unable to pay your debt, they may be more willing to reach a debt settlement agreement. Pacific Debt has an excellent track record of settling accounts and knows which creditors are most like to settle.
Some creditors will insist that you settle in full. Others will settle for far less than you owe.
You will make lump-sum payments to eliminate each debt.
I Don’t Have Money for a Lump Sum Payment
Most people don’t have a savings account large enough to cover their debts. If you did, you’d pay off your debts upfront. Pacific Debt has a solution.
Pacific Debt will set up an escrow account that you deposit money into regularly. Since you will not be paying on your debt, you take that money and set it aside. As it builds up, you settle each debt as you have funds.
How Long Does Debt Settlement Take?
Depending on how much you owe and how much you can set aside, debt settlement can take between 2 and 4 years.
How Much Debt Do I Have to Have?
Pacific Debt requires you to have $10,000 in unsecured debt, generally credit cards, and be unable to make more than minimum payments.
Many people panic when they hit a $15,000 credit card debt amount. Since that is more than most Americans earn in 3 months, a $15000 credit card debt is frightening. Pacific Debt can help.
Can I Settle Student Loan Debt?
Yes, you can settle student loan debt. However, it is not easy. Federal student loans have three options to settle student loans. All three come with a big catch.
- Option 1 – pay off current balance plus accrued interest
- Option 2 – Pay the total principal and half of the interest balance
- Option 3 – Pay 90% of the total principal and balance owed
What is the catch? You must make a lump sum payment within 90 days.
Pacific Debt can work with you or refer you to a trusted partner who can help settle student debt. Get your free debt settlement consultation today.
What are the Drawbacks to Debt Settlement?
If this sounds too good to be true, good for you for thinking about the drawbacks! There are several and these should play into your decision making.
When you stop paying on your debt, your credit score will take a hit. It generally recovers as you pay back your debts. The fact that you settled will show up on your credit report. It can take up to seven years to remove a debt settlement notation from your report.
You may be sent to collections. This comes with its own set of annoyances, from phone calls to letters. Once you have convinced creditors that you are serious about settling, creditors generally settle.
What are Pacific Debt’s Settlement Steps
First, you need to enroll and get a free consultation. You will be given options that may work for you. Choose the best solution for your unique situation.
Next, stop making payments on your unsecured debt. Pacific Debt will help you set up an FDIC insured Special Purpose account. You will make deposits into that account every month.
While the balance grows, Pacific Debt negotiates with your creditors. Your account manager will be in contact every few weeks. As your account grows, your settled debt will be paid off.
It takes about 24 to 36 months.
If you only want to improve your credit scores or lower interest rates, debt settlement is not the way to do it.
If you have questions, contact us today.
For more information, talk with one of our debt specialists today.
Disclaimer: We are not attorneys or accountants and can not give you legal advice. If you have legal or tax questions, you should contact the appropriate expert.