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Legal Status Of Settlement To Choose Debt Consolidation After Comparison

Know The Legal Status Of Settlement To Choose Debt Consolidation After Comparison 

Debt settlement is the first option that comes to the minds of debtors struggling with their monthly payments. However, this may not always be the most feasible option for all struggling debtors because it may have undesired effects on the finance and credit of a person.

It is for this reason you are requested to check the legal status of your debts as well as of this particular debt settlement option. This will help you to make a better choice between all available debt relief options, especially between debt settlement and debt consolidation.

Typically, there is a fair amount of risks of facing lawsuits while attempting debt settlement. However, different studies point out a few interesting things such as:

  • Within a year of the statute of limitations which is primarily 3 to 10 years depending on the policy of states, a law suit is rare and usually occurs in only about 2 to 5% of loan accounts
  • Over half of these loan accounts that faces lawsuits are settled even before going to the court. This is because the consumers usually have the required funds in their hand available to settle the debts.
  • There is also an opportunity for a case being settled after a summons is received by the consumer and before the court date, which typically provides them with a 30 day window.
This is simply due to the fact that the credit or usually are willing to settle these cases out of the court just to avoid the extra cost of trails as well as the risks involved in suing the customers such as the consumer getting a verdict that will allow them to have a better than average settlement prior to the lawsuits.

Therefore, it is the legal action can be considered as a debt settlement opportunity thereby increasing the debt settlement ratings provided you have necessary funds available to settle the debt with your creditor or creditors.

The estimated payback

The benefits or actually the savings you can make will largely depend on the amounts that you offer to your creditors during debt settlement. It is important to make it a win-win deal for all and not only a smoking deal for the creditor or the collector.

You will need to keep all the key factors in mind such as the amount you can arrange and afford to pay, the consequences of debt settlement on your credit score, credit history and even the tax consequences while choosing the option.

Another most important thing to consider is the estimated payback percentage depending on the type of debt that you wish to settle for a low amount with your creditor. Here is a brief list of this payback as seen by the professional negotiators of some of the top debt settlement companies in USA.

  • For all Credit Cards or Department Store Cards you can expect a 40% payback
  • For Citibank and discover Accounts it is 65%
  • Cell Phones Collections that are over $750 can result in a 50% payback
  • Apartment Lease Re-letting Fees will provide a back of 40%
  • Medical Debts and Collections is found to provide 50% 
  • Judgments, repossessions and Garnishments may provide a high 80% payback
  • All Pay Day Loans and Signature Loans will also provide a 40% payback and Collection Balances that are greater than $750 Settlements can give a settlement payback of 40%
  • On the other hand Collection Balances Under $750 Settlements will give a payback closer to 85%
  • All Debts between $750 and $1,000 will provide a 60%  
  • Those Debts under $750 will provide 80% in payback.

However, all these are typical results and are actually slightly padded. Before you follow these payback statistics blindly and choose to settle your debts, there are a few other things that you need to know.

The success of debt settlement and the amount of payback that you may receive will largely depend on the quality of the negotiator, better the higher on average.

All these numbers represent the professionals as a whole and the conditions of your financial hardship will surely play a huge role in the success of the negotiations.

These numbers are also for those professional negotiators who represent many clients having millions of dollars in debt owed to their creditors that are negotiated for settlement at once.

Therefore, it will be unwise for you to expect these numbers on your own that it will be the determining factor of your debt settlement process. Many of the subscribers of debt settlement programs have typically reported of having a non-typical and a much better payback percentages with a few even admitting that they have had such paybacks as low as 10% with their major creditors.

Have a written agreement

Another useful aspect of the legal aspects to consider is the agreement that you finally arrive with your creditors with or without the help of a debt settlement company. You must make sure that you are given a written agreement that will spell out everything in bold including:

  • The amount that you have to pay to your creditors
  • The promise that your debt and its entire balance is and will be excused from further payment once you make the mump sum payment and It will be reported to the credit bureaus as well. 

Therefore the bottom line for making debt settlement successful is to check the possibility of negotiating a settlement. It should ideally be encouraging to everyone to give it a try. Also make sure that you try different creditors as there is a good chance that you will hear a "no" from somewhere along the way.

If this is the case, do not give up and walk away. Debt settlement is not the only way to reduce your debts. Without having to ask your credit card company to reduce the annual percentage rate or APR, you can lower the monthly payment with an alternative relief option: debt consolidation loan, especially if you owe a lot of debts in numbers and amounts. This comes at low rate of interest and prolonged term.

About Author
Isabella Rossellini is a marketing and communication expert. She also serves as content
developer with many years of experience. She has previously covered an extensive range of
topics in her posts, including business and start-ups.


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