“Debt settlement companies work as a middleman between you and your creditor. If all goes well (and that's a big if), you should be able to settle your debts for cents on the dollar. You'll also pay a fee to the debt settlement company, usually either a percentage of the total debt you have or a percentage of the total amount forgiven.” IfsShouldWellsBigsAblePayCompanyAmountDollarsDebtSettlingCentsForgivenPercentagesSettlementFeesCreditorsMiddlemenDebt Settlement Author:Jean Chatzky
“If you'd asked me a few years ago about debt settlement companies, I probably would have told you to avoid them.” IfsYearsCompanyYears AgoDebtSettlementDebt Settlement Author:Jean Chatzky
“The Bankruptcy Reform Act of 2005 made it harder for individuals to file bankruptcy, which is always the last resort. Unfortunately, simultaneously consumers racked up so much debt that counseling companies - which are higher up on my list if you need help managing your debt - are sometimes unable to help. So if you fall into this camp, debt settlement may be something to consider.” IfsNeedsMayMadeSometimesHelpingLastsFallIndividualCompanyHigherHarderDebtListsMade ItReformConsumersCampsResortsFilesSettlementBankruptcyCounselingNeed HelpDebt SettlementUnable To Help Author:Jean Chatzky
“The debt settlement company will direct you to stop paying your creditor and instead send the money directly to them each month. The company's goal is to demonstrate to your creditor that you don't have the money to pay up - that's your leverage. After a few months, the company will typically go to the creditor and say, "I'm holding X dollars on behalf of your customer. He doesn't have the money to pay you, so you should take this amount as a settlement or you'll end up with nothing." If the creditor wants to get paid badly enough, it will take the money.” IfsWantShouldEndsEnoughGoalPayCompanyMonthsAmountDirectPaidDollarsDebtCustomersBehalfSettlementCreditorsEach MonthDebt Settlement Author:Jean Chatzky
“If you are able to settle, you'll be getting off rather easy. Debt settlement companies can sometimes get you off the hook for a large percentage of your debt - in many cases, up to 50% will be written off.” IfsSometimesAbleEasyCompanyCasesWrittenDebtSettlingHookPercentagesSettlementDebt Settlement Author:Jean Chatzky
“If you're filing bankruptcy, you will likely want to hire an attorney. But for debt settlement, a company is sufficient, or as I said, you can often do the legwork on your own.” IfsWantSaidCompanyDebtSufficientAttorneySettlementBankruptcyFilingDebt Settlement Author:Jean Chatzky
“No company can promise an end date, but if you have multiple debts, the first one should be settled within a year.” IfsShouldYearsFirstsEndsCompanyPromiseDebtMultiple Author:Jean Chatzky
“In most cases, if you've gotten to this point, you've already received a letter or phone message from your creditor with the name and extension of a representative. If you haven't, you can call the toll-free number on your bill, but keep in mind that the person who answers may not have the power to negotiate a settlement. Ask to speak to someone who is either a supervisor or in the settlement department, if the creditor has one (as many do).” IfsMindMayPersonsAsksNamesSpeakAnswersNumbersCasesHavensMessagesLettersBillsPhonesDepartmentRepresentativesExtensionsSettlementTollsCreditorsSupervisors Author:Jean Chatzky
“After explaining why you're in trouble, ask the creditor if the company would be willing to accept a smaller amount. Start negotiations at about 30% of the total amount due, with the end goal of paying 50%.” IfsEndsWould BeAsksGoalCompanyAcceptingTroubleWillingAmountDuesNegotiationExplainingCreditors Author:Jean Chatzky
“Most people don't know this, but if you settle a debt for less than the amount you owed, you are potentially responsible for taxes on the forgiven debt. Look at it this way: You received goods and services for the full amount of debt, but you're only paying for a portion of it - sometimes less than 50%. Anything more than $600 is generally considered taxable, but the IRS will sometimes waive the tax if you can prove that your assets were less than your liabilities when the debt was settled.” PeopleIfsKnowsWayLooksSometimesAmountProveTaxesResponsibleDebtSettlingGoodsAssetsPortionsForgivenLiabilityIrsGoods And Services Author:Jean Chatzky
“A consolidation makes sense only if you can lower your overall interest rate. Many people consolidate by taking out a home equity line loan or home equity line of credit (HELOC), refinancing a mortgage, or taking out a personal loan. They then use this cheaper debt to pay off more expensive debt, most frequently credit card loans, but also auto loans, private student loans, or other debt.” PeopleIfsUseHomeInterestLinesPayStudentsRateCreditDebtCardsMake SenseExpensiveEquityLoanMortgageCheaperCredit CardInterest RateStudent LoanConsolidationHome Equity Author:Jean Chatzky
“If you default on an unsecured debt, you won't lose anything (except points on your credit score).” IfsLosesCreditDebtScoreDefaultCredit Scores Author:Jean Chatzky
“If you have even a smidgen of doubt that you'll be able to stay away from racking up additional debt, don't do it.” IfsAbleDoubtDebt Author:Jean Chatzky
“If you are, consolidating at a lower interest rate can help you pay off your debt faster. But if there's even a small chance that you'll spiral back into debt, it's not for you.” IfsHelpingInterestChancePayRateDebtFasterSpiralsInterest Rate Author:Jean Chatzky
“Turn down offers for new cards or credit line increases on your current cards. Credit's tight, and chances are, you're not getting many offers anyway. But if you do, remember that the less credit you have available, the less trouble you can get into.” IfsRememberTurnsLinesChanceTroubleOffersIncreaseCurrentsAvailableCreditCardsChances AreNew Car Author:Jean Chatzky
“In fact, the bigger the bill, the less likely you are to spend it. If you want to really save money, spend only cash and carry only fifty-dollar bills.” IfsWantFactsBiggerBillsDollarsFiftyCashSaving MoneyDollar Bills Author:Jean Chatzky
