Cornerstones of Debt Settlement ProcessThis article lists 12 basic points that you have to pay your attention to throughout the process of debt settlement – from the process of composing a debt settlement letter and to the process of paying the debt off.
1) The Terms and Conditions of your debt We strongly suggest you recheck the Terms and Conditions of your loan before you start dealing with the letter. Pay special attention to the fees, possible tax amounts, and charged interest rates.
2) The net amount that you owe Calculate the total amount of your debt, including the applicable tax charges and fees.
3) The amount of money that you can afford to pay Make sure that you save up enough money to make a settlement offer able to awake the interest of your creditor (at least about 70-80% of the outstanding debt balance). You don’t have to pay the money right along with making the offer – but you might be requested to provide the information about the sum currently in your account for the creditors to be more confident about your paying capacity.
4) Always make the settlement offer in written form Never try to negotiate your debt in the process of direct conversation with the creditor. Do not make your first offer too high – it’s never too late to make a higher one in case your creditor rejects the first. In case you decide to compose the letter yourself, show it to a lawyer or a debt settlement counselor for him/her to check it for any possible inconsistencies or unnecessary items.
5) Do not waste any time if your creditor agrees to accept your offer
In case it happens, pay off the settled debt as soon as you can – and make sure you receive the written confirmation of the payment transfer.
6) File all the correspondence with your creditor The worst thing about phone conversations with your creditor is that you won’t really be able to verify them in the future. That’s why we strongly advice you to carry out all the correspondence in writing and file up the copies of all the debt settlement letters that you send to and receive from your creditor.
7) Completion of agreements Always make sure that all the debt settlement agreements that you reach with your creditor are complete.
8) Debt clearance In case you settle your debt with your creditor and get it cleared, make sure that the information about it appears on your credit report during the following 2-3 months.
9) Threats are no good Most debtors think that it might be a good idea to threaten their creditors into reducing the size of the debt by telling they will file for Chapter 7 bankruptcy However, in the great majority of cases this will only result in the creditor being less accommodating.
10) Proof of your debt This might seem strange but some debtors might want to validate their debt claim (use legal means to demonstrate that they really owe a certain amount of money to a given creditor). The reason for such behavior is the same in most cases – the unwillingness of the creditor to negotiate the debt. This process is often too sluggish for the creditors to be willing to get involved into it – that’s why most of them get more eager to try debt settlement being in danger of handling the debt validation.
11) Debt payment means Never use cash to pay off the settled debt – better use your card or send a cheque to the creditor.
12) Credit score Make sure that your creditor informs the major credit bureaus (Experian, TransUnion, and Equifax ) about the clearance of your debt, so that your FICO credit score doesn’t suffer.
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