|
How to settle your debts for less |
DO you have multiple debts that you need to settle with? Are you unsure how much to offer each of your debt collectors?
Here you will learn the methods we used to raise our credit scores by as much as 300 points!! Now bear in
mind we are not claiming to do this overnight but, it is legal and it works.
The first most important step
in your credit repair journey is to get a 3 credit reporting agency *from now on will be referred to as CRAs* credit
report. This is very important since not all companies report to all 3 CRAs. This means that your score on TransUnion can
be much higher then Experian or Equifax. There are many great sites to pull your credit report from but, be careful
that many will sign you up for a credit monitoring service. While I feel these are a good idea, if you are low on funds you
might not want to add the monthly cost. Now, you should also know that the FCRA allows you 1 free CR a year from each
CRA. You can obtain this by phone, mail or Internet. If you have already used your annual free CR you can buy a 3 CRA
report from this site. You will receive your CR by email within 24 hours or if you prefer by mail.
Once
you have your CR you need to understand the different types of debt you have. There is two major categories that debt falls
into good debt and bad debt. Basically, things like up to date car loans, credit cards, home loans etc, are good debt.
Good and bad debt can be both secured (has some sort of collateral that they debtor can reposses if you default) or, Unsecured.
Unsecured debt is things like credit cards or loans given without any down payment or property lien. These are normally
given out based on your credit. It is always important to pay your secured debts on time. Few things are harder on your
credit than having a car or home reposessed.
Now that you understand the difference between good and bad,
secured and unsecured debt; We will move on to a few more debt subcategories. Theses types of debt are important to know and
understand because your state laws dictate how long your debtor has to sue you based on this type of debt.
Oral Contract: You agree to pay money loaned to you by a person or company, but this contract or
agreement is verbal. Remember a verbal contract is legal, just more difficult to prove in court.
Written
Contract: You agree to pay on a loan under the terms written in a document, which you and your debtor have signed.
Promissory Note: You agree to pay on a loan via a written contract, just like the written
contract. The big difference between a promissory note and a regular written contract is that the scheduled payments and interest
on the loan also is spelled out in the promissory note. A mortgage is an example of a promissory note.
Open-ended Accounts: These accounts are established under the Truth-in-Lending Act: Title
15, Chapter 41, Subchapter I, Part A,§ 1602. Definitions and rules of construction(i) The term “open end credit
plan” means a plan under which the creditor reasonably contemplates repeated transactions, which prescribes the terms
of such transactions, and which provides for a finance charge which may be computed from time to time on the outstanding unpaid
balance. A credit plan which is an open end credit plan within the meaning of the preceding sentence is an open end credit
plan even if credit information is verified from time to time.
In other words:These are revolving lines of credit
with varying balances. The best example is a credit card account. Where your balance depends on your spending and payment
habits.
Once you understand these types of accounts you can refer to the statute
of limitations link to the left. This will show you a listing of state by state SOLs. This shoud not be the end of your
research into state laws by any means. You would be smart to look into the various laws that are unique to your state.
An example of such a law is the one on the books in CT that says that debt collectors must be licensed to collect in that
state. To check and see if your state requires debt collectors to be licensed check out: http://www.registeredagentinfo.com/
Alright, so now you have your credit report and you understand the different types of debt that are on it and weather
or not the debt collector can still sue you over this debt. Now the next thing you have to do before you can progress with
your debt settlement is to see how much you can afford to pay out in credit repair each month. The best way to do this
is to figure out where all of your money goes. You will first need to add all of your more stable bills: Gas, rent, car loans,
cable, telephone etc. The you will need to account for atleast a months worth of take home pay. If your one of those
people who uses their debit card for everything, You got it easy! Just pull out your last few months of bank statements and
add a collum for each exspense you see. If you will have a few collums when your done with only one or two purchases. This
is fine, We will consider those mis exspenses. Now if you do not use your bank for most of your purchases you will have
to work a bit harder. You will need to make a log of your dailt soending habits for a month. No matter how small
of a purchase or how seldom it happens right it down. This is because many of those small one time purchases make up the
often large mis exspenses catagory. I personally used to lump my old smoking habit in with my mis exspenses. Why not?
It was 5 bucks a day! Well, those 5 bucks a day plus my spouses 5 bucks a day equaled 70 bucks a week and 280 bucks
a month! This is just one of many examples of small purchases snowballing. Now once you have your month long spending
summary take a good look at it. If you can cut a few things out great just dont cut out every one of your creature comforts.
Your much more likely to stick to a budget if it is reasonable.Another important thing to remember is never to budget away
all of your money. The fact of the matter is things change, Gas goes up, people get sick and cars break. Make
sure that you put a little money away each week, just incase. Now take a look at what you have left to work with.
Lets say at the end of each month you have 500.00 to spend on your credit repair. Now what you want to do is make sure
that your highest intrest accounts are settled first. If that means saving for a month and making a lump sum or, making a
fair and reasonable payment plan. it is still in your best intrest to pay the higher intrest accounts first to save
you money down the road. You will notice that secured debt is not mentioned here as it should have been included in
your budget. Now lets say that you have several accounts in collections that have not reached the SOL. How do
you choose which accounts to pay first? Take a look at the age and amount of the debts in question. generally, large
amounts that are closing in on the SOL are a high risk for litigation. It would be smart however to send debt validation
letters to these companys before you start making payment arangements. This will do two things 1) prevent the debt collector
from suing you until the debt is validated. 2) Open a line of comminication with your debt collector that shows you know your
rights. If you are intrested in debt validation click the link to the left to learn all about this great credit repair
tool that is your right under the FCRA.
Once you have sent out a couple of debt validation letters and you
know what accounts are valid send a certified letter to the debt collector offering a lump sum or monthly payment that fits
your needs. You can also make this conversation over the phone but, keep in mind that you will have no proof of the
conversation. Be fair and honest with your debt collector and dont try to bite off more than you can chew. If you can
afford to pay out 500 a month don't promise more than that. If you have extra money one month make a larger payement or
set it aside for a rainy day. A very important thing to remember when negociating your debt settlement is how
the debt will appear on your CR during and after the payment. If you pay off a debt only to have it say 'paid collection'
you didn't help yourself out to much. Then again if you got a pay for delete from your debt collector, your credit score
could jump as much as 20 points!
The most important thing to remember in debt settlement is you really hold most of the cards. Yes, a debt collector can
take you to court. The chances of this occurring are pretty small if you are willing to work with them. The first
thing you need to figure out is how much to offer your debt collectors. This also depends on the age of the debt.
For the most part it is fair to offer your debt collectors 25% of the total debt. Most debt collector only pay
a few cents on the dollar to buy your debt and will still make money off of this amount. In general debt collectors
who buy debts that have recently been charged off pay 6 to 7 cents on the dollar. Debt collector who buy Accounts
that are slightly older and on which a collection agency or two has already tried to collect: 1.5 cents to 2 cents on the
dollar. Finally, Years-old, out-of-statute debts: A penny or less.
So now that you know where to start your
offers you can start to send your certified letters *how else will you prove they got them* make sure to place the return
receipts in a folder with your copy of the letter. *How else will you prove what you sent?* You may find that your debt
collectors will turn down the first offers, Thats fine. Just remember not to tip your hand and appear in a hurry to settle
the debt. This will cause the debt collector to become much more difficult and demanding. You want the debt
collector to feel that you have all of the time in the world and that you will only pay what you can afford and you will only
pay it if your terms are met. Obviously you are going to try for a Pay for delete clause in your contract, As this will
benefit you the most.If you cannot get the debt collector to budge you pay have to settle for a 'paid' or 'paid
as agreed' line on your credit report. You never want to agree to a 'paid collection' or 'paid after
written off' line on your credit report.
Once you have mastered these steps you can utilize them from
debt collector to debt collector. If you find that you must call your debt collectors make sure that you write down the name
of each representative you speak to and any employee number they may have. Keep a note book where you record each conversation
you have and the date/time that you called. Also, never give out your account info. Send out all of your payments via paypall
or certified funds. This is after you have an agreement with your debt collector IN WRITING! If you take nothing else away
from this page remember to never give out your account information and never send money without a written agreement. Leave
nothing out! Also, be sure to write 'paid in full' on your payment. Many states consider the debt paid
of funds bearing this phrase are cashed; even if the debt collector crosses it out and writes I don't agree.
|
