Debt settlement is a debt relief option available in the finance industry that is aimed to provide respite to those borrows who are finding it difficult to continue making payments. This is the process wherein the actual amount outstanding is reduced by the creditors. However, the maximum amount that may be reduced will depend on the intent and policy of the creditors.
Often, people opting for debt settlement are in a dilemma when it comes to determining the percentage of their debt that can be accepted as debt settlement by their creditors. This is a serious matter because it is crucial that the right expectation is set before you go for a debt settlement negotiation. This will raise your level of confidence.
Moreover, most of the debt settlement companies are also not much of a help to these borrowers. This is because:
- Most of these fly-by-night debt settlement companies have started their practice in recent years and therefore they do not have a real and proven track record for settling a large volume of debts.
- These are the companies that often dupe the borrowers making them enroll into one of their shady programs by alluring them with unrealistic promises that are ‘too good to be true and are seldom met.
- They take money from their clients and charge a hefty sum as fees for doing nothing but jeopardizing the credit and finance situation of the borrowers asking them not to pay the creditors any money but to them till a lump sum is created.
Therefore, it is not only important to choose the best debt settlement company by comparing their debt settlement ratings but it is also important to know the exact amount that you can offer to your creditor or creditors for your specific debt.
Stay away from the companies that make tall promises and never settle for a company without checking their actual average settlement history. You must seriously be sorting out debt problems avoid companies that do not have a history of more than five years at the minimum, the more the better.
Depends on your creditor
Right at the very outset, you must know that the amount that may be accepted by your creditor entirely depends on the creditor and not on the debt settlement company. Therefore, any company that makes a prior commitments or promises such as ‘reduce your debt by half or 70%’ should be summarily rejected from your list of contenders.
Therefore first you must know who your creditor is. This will make a huge difference in the amount accepted as average settlement and what you can expect from them. There may be a few aggressive creditors who will simply want you to pay more than you would probably pay to other creditors. However, these so-called ‘aggressive’ creditors may change their stance and attitude over time or depend on your state of domicile.
How Old is your Debt?
As your obligation ages, the leaser is less keen on holding it. They will “charge off” the obligation following 180 to 210 days by offering or doling out it to an obligation authority. All in all, you’ll have more accomplishment in settling once the obligation has become delinquent.
As you approach the 180-day mark, the bank might be happy to settle, particularly on the off chance that you have a single amount to satisfy the obligation.
When the obligation has gone into accumulations, you will in all probability be qualified for a settlement. Banks might be increasingly indulgent on settlement terms.
Contingent upon your state’s legal time limit, when your obligation ages past the cutoff, it is never again collectible. Most states have a legal time limit somewhere in the range of 3 and 10 years.
Pacific Debt’s Proven Results
Investigate a portion of our demonstrated outcomes and past reimbursements with the loan bosses recorded.
The accompanying rates mirror our repayment victories from our Debt Relief Program. Keep in mind that every circumstance is one of a kind and rates differ. We have long-haul working associations with the majority of the leasers recorded underneath. Accordingly, you’ll in all probability show signs of improvement in repayment when utilizing Pacific Debt. These 2018 YTD rates depend on the present parity at the season of settlement.
The payment history
Your payment history will also play a very significant role in determining the minimum acceptable payment for debt settlement by your creditors. This is a very important part of the credit of any borrower. There are a few important things that you need to know regarding this aspect.
- One, perfect payment history will imply there is no report of any negative aspects such as paying a month late or any other derogatory items.
- It is quite different when it comes to missing your very first payment which will surely knock your score down but then with each additional late payment it will have less and less of a negative effect on your credit history.
- If you have a perfect payment history and are current on your debt then you will have all the possible chances of settling your debt for nothing less than the full balance.
- On the other hand, if you are behind your debt payments then it is possible that you settle your debt for an amount that is less than what you actually owe to your creditors.
When it comes to unsecured debts such as credit card debts, there are a few other things that you should know as well. If you are currently on a significant unsecured debt it will “undermine” the negotiation process for those delinquent debts that you want to settle.
On the other hand, if you are behind on such a debt that you want to settle but you are current on your other significant unsecured debts that may have balances of more than $500 the scenario will be entirely different. In such situations:
- The particular creditor you are behind on your debt and wanting to negotiate with for a settlement may consider you as current or
- They may want you to pay the entire amount of debt you owe to the creditor along with the interest that you are paying to the other creditor and may be unwilling to settle your debt for a low amount.
That means, in case of unsecured debts as well, you will need to be behind in order to settle your accounts successfully for a low amount.
Know about the exceptions and other facts
However, there are a few exceptions to the rule as well just like it is in all cases. One such exception is when you remain current on a specific type of unsecured debt ad that does not harm your negotiations. These are the specific exceptions that are included in the military as well as the Federal Credit Unions accounts.
Another thing that you should know at this point is that a settlement process has a high chance of success only after it is 30 to 90 days past due. This is because your account will be ‘charged off’ by that time and it will, in turn, raise the chances of getting the best settlement.
In fact, few debt settlement companies are in favor of taking up those specific loan accounts that are 180 days past due and may have been sold to a third-party debt collector. Typically, the percentage of the settlement amount in such cases can be as less as 34. That is 3.4 cents on the dollar. Rest, you can take a wild guess!
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