What to Expect When Beginning a Debt Settlement
The debt settlement process is a complicated one, which is why it is usually in your better interest to hire a professional to steer you through it. Once you’ve done your homework and chosen a credible and reputable debt settlement company or lawyer, what should you expect from the process?
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Before any of the settlement negotiations begin, the firm will perform a complete analysis of your debts. Not all debts can be included in debt negotiation. Secured debts, which are debts that are backed by collateral to reduce the risk of the loan for the lender, as well as student loans, tax debts, and a few others, typically cannot be negotiated. Debt negotiation works best with unsecured debts, meaning there is no collateral involved. Examples of unsecured debt include credit cards, lines of credit, and medical bills.
After this is completed, you have two options to begin the settlement process. You can either put a lump sum of money into a trust account to begin negotiations with creditors, or, if this is not a possibility, you can make large monthly payments – at least 4% of your total debt – into a trust account. At this point, you stop making payments directly to creditors, and only into the trust account. Once there is sufficient money in your account to settle a debt, the firm or company begins negotiations with your creditors, one at a time until they are all settled.
Tags: debt negotiation, Debt Settlement, secured debt, unsecured debt