How to Handle Debt Settlement – A Primer for Small Business Owners

According to https://www.cbinsights.com, the inadequacy of capital was reported to be the biggest issue after lack of market need for small business failure. Since conventional bank loans are not available to startups due to the lack of a track record, business owners have no other option but to rely on their own savings and credit cards to finance the business operations. Handle Debt Settlement.Debt fund

Within a short time, they end up with a number of credit cards that need monthly payments to be made on different dates and lose control over the situation and start missing out on the payments because either they can’t keep track of the due dates or simply don’t have the cash flow to make the payments.

In the typical scenario, the card accounts are blocked and classified as delinquent and debt collectors begin calling on them. As business operations go for a spin for lack of cash and bankruptcy stares right at them in the eye, the strident advertising of debt settlement companies promising to slash debt by half or even more suddenly starts to sound very appealing, however, there is a general lack of clarity and confusion sets in. Some clarifications:

What is Debt Settlement?

Debt settlement is the process of negotiating with your creditors to settle their debts for less than what you owe them. The creditors may agree to make an offer for settling the debts if they perceive that this is the best way of recovering some of their dues as they would get nothing if you file for bankruptcy. Handle Debt Settlement.

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The success of debt settlement depends on factors like the amount that is owed, the length of time you have not been paying the monthly dues, the reasons why your financial situation is disrupted, and your convincing power that settling debt is indeed the only way you can escape bankruptcy.

Depending upon individual choice and the circumstances, there are typically four different ways in which, the debt settlement process can be initiated.

Negotiate the Debt Settlement Personally

Since engaging a debt settlement company can be expensive, you could attempt to settle the debt on your own. You can approach each one of your creditors individually explaining that you are not in a position to make the full repayment of the debt. Based on the amount of money you have, you can make an offer that is reasonable.

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There is no point in trying to settle at 10% or so because no creditor will accept such terms. You should aim for a reduction of around 50% so you should start off with a higher figure and try your best. You will be able to get a better settlement if you can pay the creditor the promised amount straightaway in a lump sum. Remember, the older the debt is, the easier it is to arrive at a settlement as the creditor would have given up hope of recovery.

Engage a Professional Debt Settlement Company

If you think that your negotiation skills are not up to the mark, it is better to hire a debt settlement company. They know exactly how credit card companies behave and react and what their settlement policies are so they can bring all their experience to bear when settling debts on behalf of the client. If you are not sure which company to hire, refer to the debt settlement ratings available online. The process of debt settlement starts long before the creditor is approached.

Between the debtor and the company, the amount that can be set aside every month is decided and deposited in a new bank account. The debt settlement company will ask you to stop making any further payments to the creditors. When there is enough money in the account the debt settlement company will initiate the negotiations with the creditors or collection agencies. Handle Debt Settlement.

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Typically, negotiations take some time to arrive at a result, following which the creditor is paid off with a lump sum payment from the bank account. After receiving the payment, the creditor discharges the remaining debt and closes the account; however, the details of the settlement remain for seven years on the debtor’s credit report.

Engage a State-Licensed Attorney Specializing in Debt Settlement

If you are already being sued by the creditor or its appointed debt collection agency, it may make better sense to hire a state licensed debt settlement attorney because they can handle both the settlement negotiations and the legal issues. It is important to first meet up with the attorney and verify his credentials as there have been many instances of debt settlement companies trying to scam customers by posing as law firms.

If you are not being allowed to personally interview the attorney, you should view the company with suspicion and move on. Once you have settled on a reliable attorney, give him a complete brief, including details of all communication with the creditor or debt collectors. Seek an estimate of the costs and the expected savings before starting off the settlement process.

Respond to a Creditor’s Offer for Settlement of the Debt

If your account has turned delinquent, creditors will start chasing you aggressively but if they have not made any progress for any reason, they may even send you an offer for settlement. Before responding to any such offer, you need to verify that the debt is indeed yours because there are many fraudulent debt collectors wanting to make a fast buck relying on the forgetfulness of customers.

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You should also check that the debt has not crossed the statute of limitations because then nobody can sue you for its recovery. If indeed the debt is yours and is collectable, you should review the terms and take a decision to either accept it or make a counteroffer. You can engage a debt settlement attorney of a company to assist you to get a larger reduction of the debt. Handle Debt Settlement

Conclusion

Being forced to settle debts is not a happy state of affairs as there will be a negative impact on your credit score. However, it can save you from filing for bankruptcy. By making future debts to the minimum and making payments on time, you can progressively improve your credit score. Most importantly, you should make smart choices that allow you to avoid habits that lead you into debt. Handle Debt Settlement

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