Cautions to be followed in Debt Negotiation, Debt Settlement,
Debt Elimination and Debt Reduction Program.
We have mentioned bellow different benefits and costs of
debt programs being offered by various companies in America.
All Debt Negotiation, Debt Settlement, Debt Elimination and
Debt Reduction Programs are basically same programs only different
name has been given. This is not the kind of loan program.
In these programs the borrowers have to open an account in
a trust or bank and deposit their funds. Now you are not compelled
to make payment to their creditors. After 6 months of non-payment
your creditor may be sued against you. It is very simple that
when you stop payment legal proceedings will be carried against
you. And as you have joined in the debt settlement/negotiation
program and if you are fortunate enough then you will receive
a 1099-c, which is the form, issued by lenders to forgive
you certain amount from the total debts.
A creditor can only sued against his/her borrower if he/she
would have taken more than $1000.
Why you will join with this program:
- Those who have taken a minimum of $1000
- Become charge off after 6 months of non-payment, which
will stay, on the basis of their credit report.
- You will serve with a subpoena to appear in court.
- Get a judgment, which can be renewed and enforced
by the creditor for the rest of their lives. Not even bankruptcy
can remove it
Lets have an example of benefit in Debt Settlement Program:
If you have a debt of $4000 and want to settle then it may
be reduced up to 50% i.e. $2000. It would be considered according
to your income.
Most of the creditors consider your first 3 to 4 payments
for their fees. If you have taken a small of credit from your
creditor then no need to go for a debt settlement as the required
payment will be covered in these time. If you have taken large
amount then after 6 months of non-payment to your creditors
your accounts are charged off as a bad debt. Once the account
has been charged off you can be sued by any creditor or collection
agency that has not agreed to a binding settlement offer.
Keep in mind binding settlement agreements to or from your
creditor or collection agency must be paid within a short
period of time. So if it is going to take 1 to 2 or even 3
years to save up enough money to offer a binding settlement
you can rest assured your creditors will not wait for this
to happen. Also if that settlement agreement is not kept,
it is then null and void. Don't be fooled by this slick sales
pitch.
Above all there are many other options in a debt management
program. It is up to you whether you will opt for a debt settlement
or prefer to file a bankruptcy. Like every situation this
program has advantage as well as disadvantage. If the debt
negotiation company is successful in obtaining a settlement
agreement the money you have saved will then be distributed
to that creditor. These programs are best suited for those
who are behind many years in payments and want to resolve
their credit issues without having to file for Bankruptcy.
If you settle a debt yourself make sure to ask your creditor
to mark the account on your credit report as "paid,"
not "settled". This does reflect more favorably.
If it doesn't reflect as paid, creditors can sell off your
debt to an outside source, which can come along anytime and
try to collect. They could file a judgment in which case you
would have to pay that debt back or have the judgment on your
credit report. Also make sure you get your deal in writing
before you make your payment. You won't have much leverage
to get things changed later if you don't have documentation.
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