Sarah Edwards | December 28, 2022
Summary: The end goal of debt settlement is to be released from a financial obligation and have your account reported as settled or paid in full. As such, when settling a debt, there are certain things you should ask for in a settlement agreement, including: the stipulation that payment constitutes full settlement of the account, a requirement that the creditor reports the account settlement to the credit reporting bureaus, and the creditor’s release of all further claims related to that debt.
If you’re seeking to eliminate your debts through settlement, congratulations! With debt settlement, you can wipe out your old obligations and start your new life unencumbered by the neverending cycle of minimum payments and debt collectors.
Before starting the debt settlement process, you’ll need to understand how it works, including what to ask for in the agreement. You’ll also need to prepare yourself for inevitable negotiations. Depending on the number of creditors you have, you may need to speak with multiple companies before you become debt-free.
When starting the debt settlement process, first determine your non-negotiables. The end goal should be a release from the remaining balance of the debt and to have your account reported settled or paid in full to the credit reporting bureaus.
As such, your written agreement should indicate that your payment constitutes a settlement and request that the creditor forgives the remaining balance of the loan.
Below are some mandatory items to ask for in a settlement agreement:
You may also include any terms specific to your deal. For instance, if you plan to extend your settlement payments over a few weeks or months, the agreement should indicate the due dates.
Here’s a debt settlement agreement example, with a preview attached below:
Debt settlement involves paying off an old obligation for a fraction of its original value. In exchange for a one-time payment, your creditor agrees to release you from future collection efforts and reports your account as settled to credit reporting bureaus.
As long as you abide by the terms of your settlement agreement, the creditor can no longer pursue you for payment.
If you’re seeking to eliminate all of your debts, debt settlement can save you thousands of dollars in interest and penalties. It also allows you to pay less than you truly owe the creditor.
Debt settlement does have disadvantages. Your credit score will take a hit, and it may take some time to recover. You’ll may have difficulty getting new credit or buying a home for a few years, depending how other accounts in your name are being handled.
However, you can repair your credit score and emerge from the process in a better financial position, with more money to spend on the things that truly matter: like taking care of your family and saving for retirement.
Debt settlement agencies offer to settle your debts for a fraction of the cost, acting on your behalf to negotiate fair agreements with your creditors. You pay them a set monthly amount throughout the length of your program, and they save the money to put toward paying off your debts.
While working with a debt settlement agency may sound like a good idea, they’re expensive. Typically, you’ll pay about 25% of the total value of your debt to the settlement company for its services. The fees you pay to the agency are baked into your monthly payments, and there is no guarantee of savings from their negotiations.
Let’s look at an example.
Example: Mike has $10K in credit card debt. He signs up with a debt settlement agency that manages to settle all the debts for 65% of their original value. The debt settlement company adds 25% to the bill for their services. Mike ends up saving only 10% through the program, or $1K.
You can handle debt settlement yourself and save the money you’d pay to a settlement agency. It will take additional effort, but the payoff might be worth your trouble.
First, list out all the debts you intend to settle. Include the total amount you owe, the name of the creditor currently owning your account, and your last transaction with it.
Next, create a savings plan. Ideally, you should save as much money as possible each month toward paying off your debt.
Proper debt settlement plans require you to stop making payments to your creditors. When you stop making payments, your creditors will be more willing to accept a settlement offer since they think you no longer have the money to keep up with your minimum payments.
Use the money you’d typically pay your creditors and put it in savings. If you can, take on a second job to save more toward your settlement plan. The faster you can settle your debts, the quicker you can recover financially.
Identify which creditors you want to pay off first. Some people start with small debts, which allow them some early wins. You’ll also be able to build up your negotiating skills before you get to the more significant obligations, which can be costly to settle.
You’ll want to send a debt settlement offer that you can modify for each account. The offer should include specific information, like:
The amount you offer as a settlement will vary depending on who owns the account and how old it is. If your account is still with the original creditor and you haven’t made payments for at least six months, it’s fair to offer 50% of its value in return for a settlement.
If you’re the subject of a lawsuit from a debt collector, you’ll want to take action quickly. Follow these steps to settle your debt:
To learn more about these three steps, check out this video:
SoloSettle, powered by SoloSuit, is a tech-driven approach to debt settlement. Our software drafts, sends, and receives settlement offers on your behalf so you don’t have to deal with the stress of communicating with your creditors or debt collectors.
On top of handling the negotiation process, SoloSettle’s services include the management of your debt settlement agreement documentation and payments. That’s right; SoloSettle makes settlement payments to debt collectors for you so you can keep your financial information private and safe.
Most importantly, SoloSettle is not a scam. In fact, many people prefer SoloSettle over traditional debt settlement companies for the following reasons:
Still not convinced? Check out this review from a real SoloSettle customer:
“I'm very thankful for SoloSettle.. Having a third party negotiate the settlement was instrumental in resolving this case and saved me from two giant headaches: 1) I didn't have to deal with the plaintiff's lawyer and 2) I didn't have to go to court. I also love that the payment was processed through SoloSettle. I was nervous about sharing my personal financial data with the other side, but SoloSettle protected that for me. I hope I never get sued again, but if I do, I would use SoloSettle again in a heartbeat.
SoloSettle really saved me a ton of time and heartburn and kept me from having to be my own lawyer in court.”
SoloSuit makes it easy to fight debt collectors.
You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.
SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.
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