If you are struggling to keep up with your bills and other financial obligations, debt relief might be the best way to resolve your debts and help you regain financial stability. At Loan Lawyers, our experienced Fort Lauderdale debt settlement lawyers have helped our clients eliminate more than $100 million in debts to date. We can help you determine whether debt relief is the right option for you in a free initial consultation. Continue reading or contact us today to learn more.
What Is Debt Settlement?
According to a report from the American Fair Credit Council, debt relief programs save consumers an average of $2.64 for every dollar of assessed debt, including credit card debt. The Florida debt settlement process involves resolving your unmanageable debts by offering creditors lump-sum payments in exchange for forgiving the total amount you owe. Most lump-sum payment offers in debt relief cases run from about 10 percent to 50 percent of your total debt. Debt relief is not for everyone, but it can be significantly cheaper than paying off your debts in full.
How Does Debt Settlement Work in Fort Lauderdale, Florida?
To settle your credit card debt, you work directly with your creditors to convince them to accept less than the total amount you owe. If you owe large amounts to multiple creditors, you will need to negotiate with each creditor separately. Then, assuming you can reach a settlement agreement, you will need to find the money to make lump-sum settlement payments. Most companies realize they may get nothing at all if you have no way to pay your bills and end up declaring bankruptcy, so creditors are often willing to accept a settlement rather than risk not getting paid at all.
Our knowledgeable Fort Lauderdale debt settlement attorneys can help you with debt negotiation while you begin setting aside money for an eventual lump-sum payment. An attorney can also make you aware of drawbacks to debt relief, such as damage to your credit score and credit report, late fees and interest, and possible increased tax liability.
Types of Debt Eligible for Settlement in Florida
Generally speaking, only unsecured debts are eligible for debt relief. Unsecured debt is any debt that is not tied to or “secured by” any physical collateral, such as a mortgage secured by a house that the bank can take away for non-payment.
The following types of unsecured debts may be eligible for debt negotiation:
- Credit card debt
- Retail store and gas card debt
- Unsecured personal loans
- Car repossession debt
- Medical debt
- Private student loan debt
- Past-due utility bills from closed accounts
- Past-due rent payments from previous residences
On the other hand, secured debts are generally not eligible for settlement because the creditor may simply choose to collect the collateral. Some types of debts are not dischargeable in bankruptcy and are, therefore, not appropriate for debt relief. Generally, the following types of overwhelming debts are typically not eligible for settlement:
- Current, past-due mortgage payments
- Current, past-due rent payments
- Federal student loan debts
- Past-due criminal fines
- Past-due child support or alimony
- Back taxes
- Gambling debts
- Past-due utility bills from current accounts
- Rent-to-own agreement debts
Debt Settlement vs. Bankruptcy
Distressed debtors may consider debt relief and bankruptcy at the same time. Each debt resolution strategy has its advantages and disadvantages.
In a debt settlement plan, you pay off a portion of your debt in exchange for the creditor writing off the remaining balance. In Chapter 7 bankruptcy, consumers use the money they make from selling off certain assets to pay off a portion of their debts. The rest of their eligible debts are then discharged.
Bankruptcy can be less appealing to consumers who don’t want to surrender their assets or have a bankruptcy filing in their financial records. It can also take seven to ten years for a bankruptcy filing to be removed from your credit history. Bankruptcy is less attractive to creditors since they may receive far less money from someone who declares bankruptcy than they would from someone who proposes a debt settlement. Additionally, not everyone qualifies for bankruptcy, but any struggling consumer has the right to pursue a debt relief agreement.
However, bankruptcy does have some advantages. The Chapter 7 bankruptcy process is typically completed within a matter of months, whereas debt settlement can sometimes take longer. Declaring bankruptcy also prevents creditors from making collection calls or filing lawsuits, which is not the case with debt settlements.
Debt Settlement vs. Debt Consolidation
While debt relief allows you to reduce the overall amount of what you owe, debt consolidation will enable you to reduce the number of creditors you owe. Consumers work with financial institutions or debt collectors to combine two or more debts into a single consolidation loan.
With a consolidation loan, you have just one monthly payment and one interest rate to worry about instead of several, which can be a huge psychological relief. By making payments to just one lender, you can reduce stress. Additionally, you may be able to get a lower interest rate and avoid costly fees. You can also include both secured and unsecured debts in a consolidation loan.
One drawback to consolidating your debts versus debt settlement is that you will still need to pay the total balance of your consolidated debt. However, debt consolidation may be a good option if you don’t have the money to make a lump-sum payment for a debt relief agreement.
Talk to Our Fort Lauderdale Debt Settlement Lawyer Today
Debt settlement is a solid option for many consumers, but there are many factors to consider before deciding if it’s right for you. Contact the Florida foreclosure defense lawyer at Loan Lawyers today to learn more about the pros and cons of debt relief in a free consultation.
