George Simons | October 19, 2022
Summary: Did you try to manage your debt with National Debt Relief? If you have a debt management or consolidation plan that went sour, find out what to do next.
Debt settlement may seem like a good option when you find yourself overwhelmed by several delinquent debts. When you're in such a desperate state, you can easily buy into the promises of a debt relief company such as the National Debt Relief. Unfortunately, you may not be aware of all the risks involved with this type of debt relief until later in the program, when things fail to work out in your favor.
Don't lose hope, though; you still have a chance to fix your debts problems with informed decisions. Here's all you need to know about a debt settlement program before signing up for one and how to fix certain issues that may arise in the process.
Debt settlement, or sometimes called debt relief, is a strategy used to reduce the amount of debt a person owns, making it easier to clear the debt. It involves negotiating the terms of the debt with the creditor to lower the interest rates, forgive a portion of the debt, or consolidate several debts into one with a lower interest rate.
You can negotiate the debt by yourself, although most people prefer debt relief or a debt settlement company such as National Debt Relief. The main goal is to convince the creditor to accept a lesser amount as settlement for the debt you owe. In return, the creditor will stop any collection efforts.
When you seek help from a debt settlement company, they'll ask you to provide the details of your debt, including the name of the creditor and the amount you owe. Then, you'll be provided with an estimate of the reduced debt and the monthly installments you'll need to pay towards that debt.
To qualify for settlement, the debt has to be past the due date. The debt relief company may also advise you to stop paying your creditor and instead put the money into a separate account.
You may be required to continue saving for several months or up to a year before the debt relief company begins negotiating with your creditor. Once the creditor and the relief company agree, the latter will pay the creditor using the money you saved and keep a certain percentage for their negotiations.
Debt relief can help you get out of a tough situation, especially when you're dealing with multiple creditors. However, it should be regarded as the last option if other debt-relief options fail.
Failing to pay your creditor on time will affect your credit score and may deny you chances of ever getting any more loans in the future.
Unfortunately, that's the basis of the debt settlement program. Remember that you'll be making payments to the debt relief company and not directly to the creditor. As a result, your credit will be treated as an unpaid debt for as long as the creditor doesn't receive any payment for the debt you owe. Therefore, your credit score will keep dwindling as time goes by.
Another blow to your credit score comes from the duration of the negotiations. The negotiations may last anywhere between months and years, depending on the circumstances of your debt. During this period, penalties and interest rates will continue to pile, increasing the debt. Unfortunately, there's no way to guarantee positive outcomes from these negotiations.
If the creditor agrees to forgive a certain amount of your debt, the IRS will count it as an income that needs to be taxed. Additionally, money deposited to the account opened for the debt relief can also be subject to tax.
You'll have to pay the debt relief company a certain percentage of the debt they settle for you. You may also be required to pay for additional fees that are unique to the company. Be careful of debt relief companies that ask you to pay upfront for their services - there's no way to guarantee that they'll be successful.
If the debt relief company succeeds in negotiating your debt, the new debt may stretch over a longer period, leaving you frustrated. Unfortunately, many people fail to keep up with these agreements because of the prolonged payment period and may drop them along the way. That's when all things begin to fall apart.
When the debt relief company fails to reach an agreement with your creditors, you may end up in bigger problems than when you started. Chances are that your debt will be bigger because of the accrued interests and penalties. Your credit score might also drop due to late payments. However, you may be able to opt out of the debt settlement plan to salvage the situation.
You'll have to check with your debt relief company to determine the terms and conditions of opting out of their program. For example, the National Debt Relief allows you to cancel the program at any time if they're unable to settle the debt or you aren't satisfied with their services.
You won't be charged any penalties or cancellation fees, and you'll have your money back. Now that you're back on the drawing board, you can consider other ways of resolving your debt.
If you qualify for bankruptcy, you'll be protected from creditors, and some of your debts may be permanently deleted from your credit records.
However, filing for bankruptcy also has its consequences. Examples include:
Debt management plans allow you to pay for your debts using a plan that incorporates all your resources and the debts you owe. Some plans may also include waived fees and lowered interest rates.
A credit counseling agency can help you create this plan, and all you'll be required to do is make single monthly payments to the company. The agency will then distribute this money to your creditors according to the plan.
You can contact your creditors and negotiate a debt settlement on your own. Most creditors would be open for negotiation, especially if the debt is delinquent. If you give them valid reasons why you delayed paying the debt, they may be willing to work out a repayment plan with you.
There are various reasons why borrowers fall behind in debt repayment. However, their decisions when attempting to clear these debts will determine whether they'll become debt-free or remain in a vicious cycle of debt.
For example, using SoloSuit to respond to a debt collection lawsuit is one of the best, easiest, yet effective ways to defend yourself if you ever find yourself in such a situation. SoloSuit is an easy-to-use legal software developed to help individuals sued for a debt respond swiftly, increasing their chances of finding a long-lasting solution to their financial problems.
SoloSuit makes it easy to respond to a debt collection lawsuit.
How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.
"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James
Here's a list of guides for other states.
Being sued by a different debt collector? We're making guides on how to beat each one.
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