Credit Cards » Credit Card News » Can You Really Settle Debts Through A Partial Payment?
Date July 1, 2009

Can You Really Settle Debts Through A Partial Payment?

If you have been following the news, you are probably aware of how much of a crisis the credit card industry is in right now. If you are also one of the many Americans who are having problems with credit card debt, you are probably highly interested in getting rid of those debts quickly.

Can You Really Settle Debts Through A Partial Payment?You’ve probably heard of debt consolidation loans, credit counseling options and debt settlement companies. You might also have come across a strange article or news item where some lucky credit card holder was able to settle their debts for by paying an amount far lesser than their original debt. “Is that for real?”, you probably ask yourself. Actually, yes it is and here’s why.

Credit card companies are now experiencing a large number of charge offs. A charge off is when the company has to consider a debt as a loss. Usually, a debt is written in the books of a credit card company as an asset. However, once the credit stops paying that debt, the credit card companies get worried. This is because, if the non payment continues for six months, they will have to writ it off as a loss. This means that the debt is very likely to remain unpaid. For obvious reasons, credit card companies want to avoid this as much as possible.

This is where a debt settlement arrangement comes in. As mentioned earlier, a debt settlement is when a debtor pays an amount far lower than the original debt to have it settled. Because credit card companies do not want to list debts as losses, they are more agreeablt to letting the debt be settled for a lesser amount than losing the entire amount instead.

This kind of arrangement is actually what is making debt settlement companies large profits right now. The ability of these companies to settle debts for far lesser than they are worth are enticing many people to sign up for their service, even with their high upfront costs and risky practices. What most consumers don’t know is that, debt settlement arrangements can easily be arranged by the consumers themselves. There is really no need for a third party negotiator.

If you have a large credit card debt and you are having some trouble paying it off, you should probably call up your credit card company and see if you can get a debt settlement arrangement. The chances are actually very good that you can actually have your debts forgiven while only paying around fifty to seventy percent of the original debt. Sounds great? It is but you should know that by going into a debt settlement agreement, your credit score will take a big hit. The record will also stay with your score for seven years which will greatly stifle your ability to take out a loan.

Date June 27, 2009

How Do Debt Settlement Plans Work

If you have ever come across offers for debt settlement, you are probably very curious about these offers and would like to know if their promises will actually work. You might even be considering signing up for one at this very moment. Well, before you do anything, first read up on how debt settlement plan works so that you’ll know the risks you are getting into and if it is worth the rewards.

How Do Debt Settlement Plans WorkDebt settlement companies are becoming more and more common nowadays. Taking advantage of the panicked feeling of many American consumers faced with enormous debts and no way out, debt settlement companies are becoming major players in the credit industry.

Debt settlement companies primarily rely on two things, the desperation of both debtors and creditors. Debtors are obviously desperate to get out of debt as quickly as possible. Creditors are also desperate because many debtors are defaulting on their debts and write offs are on the rise. Write offs are written as losses in the books of creditors, something they want to avoid so badly that they will negotiate for payments 50% or lesser than the original debt owed to them.

When you sign up for a debt settlement deal, you might be surprised by the fact that the first thing that they will tell you to do is to stop paying your bills. You are instead told to deposit your monthly payments to an account maintained by the debt settlement company. Also, the debt settlement company will ask you for a sizable upfront payment as well. They will also get a percentage of your debt as payment for their services later on.

When you stop paying your bills, you will get late fees, an increase in your interest rate and penalties, depending on your credit card. At this stage, there is no agreement between your debt settlement company and your creditor yet. When the credit company finds out that you are not paying your bills, they will now have the option to bring a lawsuit against you which will endanger your properties, if you have any or wages, if you are employed.

As you continue not paying your debts, your debt settlement company will then try to negotiate with your creditor to accept a payment of a lesser amount than the original debt to have your debts forgiven. Most companies aim for 35% of the original debt. If the creditor agrees to the settlement, then your debt is forgiven. However, your credit report will be marked with “settled for less than full amount” which will have a large negative impact on it.

As attractive as debt settlement offers are, there are clearly very serious risks involved. While you may have your debt forgiven for a percentage of its original amount, you will end up ruining your credit report. If you are employed or you own your home, you might be putting these in jeopardy as well. So think hard and consider all consequences before making the jump to a debt settlement program.

Date June 26, 2009

Debt Settlement, A Two Edged Blade

Understandably, American consumers are now scrambling for every available means of maintaining their finances. A large debt is a huge drain on the monthly income and is therefore something which should be settled as quickly as possible. Skipping on debt payment is an option and, indeed many consumers carrying debts too big to handle are opting for it. However, in the long run, it is a disastrous solution. The best way to get rid of debt is to pay it off. The problem is that, in the current economy, paying off debts can drain away all of a month’s pay.

Debt Settlement, A Two Edged BladeThis is why debt settlement is a fast becoming popular way of getting out of debt. The popularity of debt settlement is caused in a big way by the high growth of debt settlement companies. Debt settlement companies are financial entities which try to entice debt laden credit card holders by promising to settle their debts for a fraction of the original amount. These companies often make it sound as if debt settlement is an easy and safe way to settle your debts. Unfortunately, nothing could be further from the truth.

Debt settlement is a risky affair. If you use a debt settlement company, there is a large probability that you will get worse off than you were originally. Debt settlement companies also offer a service which you can very well do on your own without having to pay large fees.

While debt settlement companies are risky, debt settlement itself is also something that no one should take lightly. True, because of the economic crisis, credit card companies are more than willing to settle for a lower amount in order to forgive a debt. However, when a credit card company does this, they are likely to stop trusting you as a borrower.

The biggest blow that you’ll get when you go for a debt settlement is in your credit score. Your credit score shows how good of a borrower you are. When you get loans, your credit score is usually the first thing that a creditor will check. A low credit score will lower your chances of getting the loan approved. This is why the effect of a debt settlement agreement can be very dangerous for you. Debt settlement will put a black mark on your credit score which will stay there for seven years. It will have a huge negative effect on your score so that you will find it difficult to secure a loan in the future.

To avoid ruining your credit score, review every available solution first before you settle on debt settlement. There are many credit counseling groups which can help you do this. It is important to inform yourself first before you make a decision.

Date June 14, 2009

How Debt Settlement Program Can Work For You

If you are in the midst of heavy debt and you’ve looked around for a solution to your problem, no doubt you’ve come across debt settlement offers and are curious as to what they are. Here are a few things that you need to know about debt settlement programs.

How Debt Settlement Program Can Work For YouDebt settlement companies work as a kind of “middle man” between you and your credit lender. They will try to resolve your debt problems by negotiating with your creditors to see if they can lessen the debt that you owe. Debt settlement companies are mostly known for dealing with credit card debt settlement but they also handle other types of debt.

When you are dealing with a debt settlement company, they will usually require a “lump sum” from you to be able to negotiate with your creditors. In the best case scenario where you have an adequate “lump” amount, negotiations can then proceed. However, if you don’t, the company will ask you to stop paying your credit company and pay them instead. Your payments will then be deposited to your account in the accompany and, once it reaches a certain amount, the debt settlement company will then negotiate with your creditor.

Usually, a debt settlement company already has an ongoing relationship with your creditor. Thus, you can expect for the negotiations ot move quickly. The debt settlement company will offer for a percentage of your fees to be “forgiven” in exchange for a payment of your lump amount. Depending on the lending company and the lump sum amount, the lender may be willing to settle as they don’t really want your continuing debt to add up to their already big debt write offs.

Debt settlement companies usually charge upfront for their services. Furthermore, they may charge anywhere from 25% to 35% of your debt balance based on the amount you owe, the amount you can save through debt settlement and the number of accounts that you have debts on.

The amount of time it takes for debt settlement to remove all your debts and make you debt free depend largely your debts and on your lending company. However, most debt settlement companies can settle debts anywhere from 2 to 4 years.

With the current economic crisis going, you really should do your best to lower or remove your debts. In this regard, debt settlement companies can be quite helpful. Just make sure that you are aware of the legality of your debt settlement company and always insist that, whatever agreement you enter into, there is a written and duly signed document to back it up.

Date May 31, 2009

Debt Settlement Programs are Hurting Rather than Helping

The credit card problem has reached an all time high and many cardholders are currently delinquent in their bill payments.

Debt Settlement Programs are Hurting Rather than HelpingThe figures get much worse when considering the current unemployment rate in the U.S, which is, according to Fitch Ratings, at 8.9%. It is the highest unemployment rate of the country since 1983. With little in the way of available cash, consumers are turning to credit cards. Unfortunately, many are not keeping up with their bills and the credit card crisis just gets worse and worse.

Most consumers mired in credit card debt would like to get out of it as quickly as possible. Inevitably, some are caught in the latest of scams to hit consumers, the debt settlement companies.

Debt settlement companies are not scams per se. However, a large number of companies are taking advantage of the desperation among credit cardholders so that those legit companies end up getting bad press as well. These unscrupulous debt settlement companies often charge high amounts, take advantage of people’s ignorance of credit card practices, and ultimately end up increasing the debtors’ debts rather than lowering them. The debtor’s credit score is also inevitably affected negatively by the debt settlement company’s actions.

The unscrupulous actions of debt settlement companies are not going unnoticed. There have been some media coverage about debt settlement companies that scammed their customers and Andre Cuomo, Attorney General of New York, launched a national investigation on debt settlement companies. He has also had two credit card companies sued for false advertising and fraud. Lisa Madigan, Attorney General of Illinois, has also had some debt settlement companies sued, alleging that the companies “do little or nothing to improve consumers’ financial standings” and “engage in deceptive marketing practices”. In Texas, Greg Abbott, Attorney General, filed a lawsuit in March against a debt settlement company, alleging that the company was involved in “deceptive and misleading acts”.

Legislative director of Association of Settlement Companies, Wesley Young says that estimates place the number of debt settlement company customers at around 500,000 spread across around 1,000 companies. This makes for a huge market for debt settlement companies and Young’s group is trying its best to maintain the credibility of the debt settlement industry. Their association requires total disclosure of credit score risks and payment plans from members upfront.

Lobbyists for the debt settlement industry are also pushing for legislation for the regulation of the industry. However, it will be some time before these actually have some effect. Meanwhile, credit cardholders are learning about the high risk of debt settlement companies and are avoiding them. Some have even gone as far as avoiding credit card use altogether.

Date May 26, 2009

Regulation Needed For Debt Settlement Companies, Say TASC

Regulation Needed For Debt Settlement CompaniesFollowing a string of controversies, TASC or The Association of Settlement Companies, have released a statement saying that they are pushing for legislation that will regulate debt settlement companies on both the state level and the national level. TASC is a non-profit organization which claims to be the watchdog of the debt settlement industry.

The debt settlement industry has seen large growth this past few months owing mainly to consumers desperate to find a way to control their debt. The economic crisis has severely curtailed consumer finances. Coupled with the fact that banks are cutting down credit to reduce risk on their side, consumers with debt are scrambling for every possible opportunity to cut it down to more manageable levels or eliminate it completely. Debt settlement, being one of the ways that consumers can do this, has therefore become quite profitable.

Unfortunately, many consumers have had bad experiences with several debt settlement companies. Some debt settlement companies have been downright deceptive in their practice and their customers ended up paying enormous fees without seeing any benefits. The practice has also become much publicized and some companies have been sued. These practices, while enriching some debt settlement companies, only hurt the debt settlement industry in the end.

TASC President Chris Kesterson recently said, “Fair legislation will help eliminate the bad apples from the industry while addressing the concerns of critics and regulators. At the same time, we want to continue helping consumers struggling with their debt to get back on their financial feet”.

Currently, TASC is at work with several bills such as California and New York’s the Debt Management Services Act. The one in California is Assembly Bill 350 while the one in New York is Assembly Bill 7268. here are also bills in progress in Nevada, Tennessee and Texas. The one in Texas is Senate Bill 2233, in Tennessee it is House Bill 1278 and in Nevada it is Senate Bill 355.

TASC has lobbyists working for these bills in several states as well as in the nation’s capital, Washington D.C.

With regulation in place, TASC hopes to restore the credibility of the debt settlement industry which has taken quite a hit due to the many controversies that have happened within the industry. Currently, many industry experts are skeptical of the capability of debt settlement companies to help out their customers. Some credit card companies are also wary of debt settlement companies and refuse to deal with them entirely.

Date May 19, 2009

Finding Relief to Credit Card Debt

Credit card debt is a widespread problem nowadays. With the economy the way it is, the situation is bound to get worse. As a result of the credit card crisis, cardholders are turning every which way to find a way to settle their debts.

Getting out of debt is not impossible and there are many ways to do it. However, not all lead to debt resolution. Case in point – the recent controversies regarding debt settlement companies. Many cardholders have fallen victim to these companies that are big on promises and nothing else. The problem is serious enough that attorney general of New York State, Andrew M. Cuomo, announced recently that it will investigate over a dozen companies offering debt settlement.

Still, the problem remains – where can cardholders turn to for credit card debt respite?

Finding Relief to Credit Card DebtSelf Help

A very simple yet often overlooked solution to debt settlement is by simply calling your creditor to check if they have programs for customers who are having trouble paying their bills. Experts, however, warn that such a move can negatively affect your credit score. This particular solution is also more suitable for those who have debts in a small number of credit lines.

Financial Counseling

One of the problems with having credit card debt is having to understand the intricacies of the credit card agreement between the cardholder and the creditor. The problem also multiplies as more and more credit cards are involved. Credit counseling can greatly simplify the problem for the customer.

Financial counseling or credit counseling helps the customer visualize their entire financial situation. With a clear financial picture, the counselor and the customer can find a viable plan for dealing with the debt. The ultimate aim of financial counseling would be a workable debt management plan.

For those looking for credit counselors, the reliable ones are usually members of legitimate organizations, such as the Association of Independent Consumer Credit Counseling Agencies and the National Foundation for Credit Counseling. Counseling fees are very reasonable and even people who cannot afford the fee are still entertained.

Debt Settlement

Debt settlement companies should be the last choice that anyone with debt problems should consider. Debt settlement companies are very expensive and will require a large payment at the very start. Some companies may do away with large upfront payments, but they usually get their high fees from their customers in some other way.

Experts have agreed that the business model that debt settlement companies follow is very bad for the customer in the long run. Debt settlement plans may actually increase what the customer has to offer and hurt the customer’s credit score. Some credit companies also do not deal with debt settlement outfits.

Date May 14, 2009

The Dangers of Debt Settlement Companies

The Dangers of Debt Settlement CompaniesIf you are one of the many Americans who have found themselves having to deal with large debts, then you probably have given some thought on getting help from debt settlement companies.

If you do not know this yet, debt settlement companies offer help for people with debt problems. Usually, they negotiate with credit companies to give their customers a lower monthly payment rate or to write off a part of their debts. It may seem like a good deal but the reality of the matter is actually less comforting.

A credit counselor from The Village Family Service Center in Fargo says, “Most of the time, it doesn’t work out very well.”

Unfortunately, the current economic situation offers a great market for those who want to make quick money out of debt settlement schemes. Some are even frauds that just take money without really helping their clients. Others are newcomers to the industry and are not capable of offering a good deal to their clients and may actually make matters worse for them.

Companies that offer debt settlement are also known as debt arbitrators or debt negotiators. Debt settlement companies are usually ‘for pay’ companies. Most of the time, their clients have to pay a considerable sum even before their debt arrangements are actually changed. Some debt settlement companies can also ruin their clients’ long term credit.

As more and more Americans go into debt, debt settlement companies are seeing a rise in demand for their services. Critics are also becoming more vocal in their condemnation of the shady practices of some debt settlement companies. Even the debt settlement industry itself sees and acknowledges these practices.

President of The Association of Settlement Companies, Chris Kesterson had this to say, “There are bad actors in our industry. There are bad actors in every industry.” Kesterson also serves as chief executive of Debt Settlement America, a debt settlement outfit based in Dallas. Chris Kesterson’s association boasts 155 members.
Although acknowledging the grimier side of the debt settlement industry, Kesterson also state that debt settlement companies that have the proper experience and competence are also working in the industry. These companies offer solutions to people with deep debt problems, especially when no other option is available.

If you are one of those who are looking into debt settlement as a solution to your debt problems, the best thing that you can do is to research the background of the company that you plan on seeking help from. Beware of companies that are not forthcoming when you ask them questions. You should also ask around and listen to the advice of people who have used debt settlement companies before. If you plan on approaching a new company, make sure that they have experienced people working for them. However, you are probably best served by a company that has been in the business for a long time and has a long list of previous clients.