Debt Settlement: new information and developments
Debt Settlement is negotiating with your individual creditors or collection agencies to settle your debts for less than you owe. Other words for this process might be debt negotiation or debt arbitration. Once you’ve negotiated a new balance, you might have to pay the amount in full, or set up a reduced payment schedule that you can maintain.
This settlement process can be used on unsecured debt only. You cannot settle secured debts like mortgages and autos. The lender will just take the house or car as settlement.
Unsecured debt can be credit card debt, personal loans, and some medical bills.
Information – The Association of Settlement Companies
The Association of Settlement Companies (TASC) is a group association that “promotes fair business practices, consumer protection and industry standards for the debt settlement industry.” TASC is an organization focused on designing and implementing practices and standards for reputable companies. This organization is there to protect your interests, and lobby on behalf of debt settlement companies. All TASC member companies have pledge to uphold specific ideals governing business practices and ethics. There are over 184 members and growing. The site has search capability to find a member near you at http://www.tascsite.org/index.cfm?event=Members.
Information – Get it in Writing!
If you have reached a settlement agreement with a collection agency, don’t pay a dime until you get the settlement agreement in writing. Make sure the creditor understands that you won’t pay based on the verbal agreement; you will pay when you receive a written agreement that includes the major pieces of your agreement.
The agreement should include the information that identifies this loan, the collector by name and address and the debtor (you). All account information like the account number, balance, and original creditor should be on this contract. The amount agreed upon as the final payment should also be listed.
There should be a clause that reads something like—‘payment of the settled amount is deemed to fully indemnify the debtor from any future claims by any claimant regarding the debt.’ You can also ask that the contract or written agreement include the promise that the collection agency will remove the debt from all credit bureaus. Your original creditor will probably show the debt, but the collection agency notation would be taken off if you can get them to agree to it.
Also request a statement that you don’t acknowledge the debt is true, but you would like to close the issue.
Information – Get your free credit report and check for inaccuracies.
Before you start Debt Settlement, review your credit report and check for mistakes. Make sure your name is spelled right and that all your personal information is correct. Then make sure all the accounts belong to you. The first time I checked my credit report, there were several companies I had never heard of that had open accounts on the report. That was a very easy fix. Also check the paid in full accounts for accuracy. Everything needs to be correct.
You will go through this again a few months after you’ve settled to make sure the agreements were followed through.
There are several places where you can get your credit report for free. One of these is www.annualcreditreport.com. This site allows you to get a free credit report once a year from Experian, Equifax and TransUnion. Other free tools include one on Experian.com that allows you to examine how changes in your credit balances can improve your credit score. This tool can help you determine what debt reduction options would be best for you.
News – Changes In The Debt Settlement Industry
The government is looking at the Debt Settlement Industry and working to regulate what the companies can charge and how they work with consumers. TASC, the association above, is working on self-regulation. In the next few months and years there will continue to be regulatory changes in this industry and a focus on how these companies work.
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