- What will my income be at the time of enrolling in a debt settlement program?
- Will the funds I have in my bank accounts affect the program length and payments?
- What is Bill’s advice on how a repayment plan should be established?
Let us start with some background information.
What Is Debt Settlement?
Debt settlement, also called debt negotiation, is a process by which your lenders agree to forgive a part of your balance, saving you a significant percentage of what you owe. You then only have to pay the new, reduced amount. In some cases, you continue to make monthly payments, in others you must make a lump-sum payment.
What Qualifies as Income for a Debt Settlement Program
An individual that is considering enrolling in a debt settlement program, such as that of Freedom Debt Relief's, will be required at some point in the process to provide the company information pertaining to their income. Income consists of the following:
- Gross (pre-tax) Income (including estimated overtime)
- Payroll Deductions (ex. Taxes, Social Security, 401K)
- Total Net Take Home Pay (Gross Income Minus Deductions)
- Income from Real Property (ex. Rental or Leased Land, etc.)
- Alimony, Maintenance or Support (payable to you or dependents)
- Government Assistance (ex. Disability, Workmen's Compensation, etc.)
- Other (ex. Social Security, Pension or Retirement Income, etc.)
It is important to keep in mind that the more detailed and thorough you are with demonstrating how much income you have, the easier it is for an underwriter, negotiator, or a creditor to understand your financial hardship. A reduction in income is typically the main reason a person finds him or herself in a financial hardship, the kind of hardship that may lead the person to seek debt help. By highlighting this fact it will allow for a debt settlement company, like Freedom Debt Relief, to assess your situation and leverage these facts in negotiating a settlement.
Assets and How They Affect a Debt Settlement Plan
Typically assets such as how much money you have in your bank accounts do not necessarily impact the program length or payment schedule in a debt settlement program. However, if you have a considerable amount of funds in a savings, checking, certificate of deposit, or other accounts it is typically advisable to use the funds to accelerate the settlement process. There maybe a situation while in the debt settlement program where a creditor is willing to settle, but you may not have sufficient funds set aside in your special purpose account to settle the debt. In this circumstance it may be advisable to use the assets or funds you have set aside to settle the debt as soon as possible.
Bill’s Advice on a Debt Settlement Repayment Plan
Debt settlement programs, such as the ones that Freedom Debt Relief have to offer, are an effective method for resolving debt problems for people who can no longer afford their minimum monthly payments. Many companies offer payment plans that can last up to five years with estimated settlement amounts that can save individuals up to 70% of their total debt. Companies that offer these long term plans and high estimated savings figures can result in detrimental outcomes for the individual enrolled in the program. It is better to be conservative with a debt settlement plan.
In other words, it typically makes better sense to pay as much as possible to have the debt settled in the shortest time possible. It is not advisable to take the lowest payment for the longest term just because it is easy or feels comfortable. One must keep in mind that by extending the time frame it can mean a higher risk that a creditor will take legal action against the individual.
Furthermore, making the lowest possible payment can result in not having sufficient funds available if a creditor is willing to settle. Therefore, you can miss an opportunity for a settlement. If you determine that debt settlement is the right choice, then you must take into consideration the risks involved, and the best strategy to complete the program as soon as possible.
I hope this information helps you Find. Learn & Save.