Learn These 10 Important Things You Should Do During a Debt Settlement Process

The process of debt settlement is almost impossible if done alone, or if done without the know-how of the process; it is like wishful thinking of being debt free. It is important to involve knowledgeable people to help you manage your finances and clear you from debts as well as improve your credit score.

A good bankruptcy advocate understands the importance of being debt free and proper management of debts whether as an individual or company.

In the year 2014, a statistical survey carried out in Connecticut indicates that at least three hundred (300) people in each county population petitioned for bankruptcy.

It is obvious that is a very large number of individuals declared bankrupt, and a clear indication that bankruptcy is increasing rather exponentially.

Discussed below are some of the pointers to help in understanding what is expected of you while undergoing debt settlement process, and also, what to expect from your bankruptcy attorney.

1. Importance of a negotiator

A negotiator is an important part of your debt settlement process because he provides a guideline to follow in clearing your debt in the shortest time possible. The negotiator is mostly a debt settlement company licensed by the government and authorized to conduct such duties. The negotiator will act between you and your creditors and develop a suitable plan of payment.

2. Explore your options while looking for a debt settlement company

Consult a bankruptcy attorney before engaging with a debt settlement company. The attorney has the ability to advise you on the best process to follow to pay off your debts or settle with your creditors. Most of the debt settlement companies are licensed by the Federal Trade Commission and have been issued with guidelines that protect people from consumer exploitation.

You can also look up from National Foundation of Credit Counseling to help you understand what to expect from a debt settlement company.

3. Look for a well known debt settlement company

The importance of getting involved with a debt settlement company is that they act as negotiator between you and your creditor and they also set the terms in which you will settle your debt. This lessens your trouble and hustle in evading tough dialogue and aspects you may not understand as an individual or company.

A legit company is a safe harbor from harassment by the creditors since it fully understands the laws and terms in place.

4. Understand the debt settlement company protocol

It is important you research the protocols followed by the specific debt company you have chosen. This will help you understand the payments you are supposed to make to the company and how the company will help in paying your creditors. Most companies have open fees that vary with the size of your debts.

In the end, you need to understand the expected duration of fund collection necessary to pay off your creditors.

5. Document all conversations, transactions and agreement

You need to document everything that happens between you and the debt settlement company; this includes all conversations, transfers and receipts that have passed between the negotiator and the creditor. Documentation will help you keep track of what happens and how it happens.

6. Understand the risks and rewards involved when dealing with the creditors

You should be able to clearly identify the risks involved when negotiations are ongoing with the creditors and the rewards as well. The normal risks are usually tax liabilities, increased collection activities and filing of lawsuits by the creditor. The debt settlement company should be able to advise you on the way forward in case any of the mentioned risks take place.

In case you are sued by the creditors the debt settlement company may not help you settle or stop the lawsuit and therefore the creditors may continue taking up your wages or income even as you settle the debt.

7. Understand the chances of credit damage

Normally, the debt settlement company will advise you on saving your money in an account to make it accumulate to pay the creditors. This means you may not be able to make any scheduled payments as expected and if the payments are delayed for a long time they start reflecting on the credit scores.

The process of debt settlement is therefore mainly controlled by time, with the noting that the sooner you clear your debt, the sooner your finances line up again.

8. Understand the fine rates

It is important to understand the rates of the fines expected to be paid. For instances in paying taxes, you should understand the rate at which you are paying your arrears and penalties. The rate of the penalty or fine mostly depends on the months you have defaulted paying taxes and the nature of your income.

This will help you and the debt settlement company to carefully evaluate your payment plan according to your current finances.

9. Understand the main and common reasons for bankruptcy filing

Getting to understand the major pitfalls leading to bankruptcy filing in the area you are situated at helps in avoiding falling under the same problem. For instance, individuals filing for bankruptcy to avoid foreclosure of houses, filing bankruptcy due to misuse of credit card and mismanagement of finances.

It is also important to understand when it is necessary to file for a bankruptcy petition. Filing bankruptcy can also help you in settling your debts.

Chapter 7 is important in filing for bankruptcy since it enables one to understand and differentiate liquidation and reorganization of your assets and property with the help of bankruptcy court. The chapter enables your trustee to pay off the creditors to the major percent of what you owe them.

This relieves you the burden of having to negotiate with the creditor. Chapter 7 enables you to secure your debts. In order to file for chapter 7, a debtor must first take the means test to determine whether they are eligible first.

10. Take control of your finances

Immediately you are free from your debts and free from creditors, ensure control of your finances. Avoid overspending or cases of bad debts, ensure timely return of taxes and make timely and full payment to you creditors to avoid accumulation of debts.

The take home

Make wise investments that will not weigh you down financially or force you to borrowing more money that ends up being difficult to refund. As the old saying goes: Patience leads to victory!