NYC Debt Law Should You Settle Your Debt

The Current Debt Picture

Although economic conditions have been improving, there are still millions of Americans with vast amounts of debt, looking in the mirror and asking, "Should you settle your debt?" Whether it comes from credit cards, mortgages, medical bills, or student loans, most Americans are living with some type of debt.

The average U.S. household has approximately $7,087.00 in credit card debt, according to an April 2014 analysis. Overall, American consumers owe a whopping $11.68 trillion dollars in debt. With so many Americans in debt, a common question that can be difficult to answer by yourself is, "Should you settle your debt?"

You're Not Alone

Many of our firm's clients are facing this exact situation; they are making a modest income that needs to be spread among many different responsibilities, such as rent, bills, food, and credit card payments. If you have children, those responsibilities can be multiplied 2 or 3 times, making it even more difficult. It can also be challenging to determine when it makes sense for you to settle your debt. The following are key indicators that debt settlement may be your best solution to debt relief.

Should I Settle My Debt? Determining Factors

You are only able to make the minimum payment:

Credit card companies usually calculate the minimum payment as a fixed percentage plus any late fees and interest charges. Often the minimum payment is slightly more than the monthly interest charges. For example, if your balance is $1,000.00 with an APR of 20.99%, and the minimum payment is 2% of your balance, then the minimum payment is $20.00, and the interest accrued every month would be $17.49.

If you only make the minimum payment, you will be paying about $2.50 of principal, the rest of your payment will be used to cover the interest. If you can only afford to make the minimum payment then it is possible that debt settlement is right for you.

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You are carrying a balance on multiple accounts:

If you have more than one account that is carrying a balance, debt settlement may be your best option. The old saying, "Don't bite off more than you can chew," applies to credit cards as well. It can be extremely easy to open additional accounts as expenses pile up; however, you can then be forced to make minimum payments on multiple accounts, spreading your income even further.

Having an account in Collections:

If you have an account that is sold or transferred to a Collection company, debt settlement could be your best option. Generally, collection companies purchase debts for less than the amount they're claiming is due. They then have the right to collect the entire amount of the debt. Many times collection companies will agree to settle for less than the amount that is due an account because doing so can be more cost effective for them. If they settle an account quickly, it saves them costs, and in turn, can save you more money.

What about my credit score?

Occasionally, consumers will not settle their debts due to the impact it may have on their credit scores. Even though settling your debt for less than the full amount owed may negatively influence your credit score, it is usually offset by having the account reported as settled on your credit report.

It is important to keep in mind that it is best to settle these debts before the creditor files a civil action. If the creditor files a lawsuit, it can be much more difficult and costly to resolve. It is imperative to be proactive and keep track of all your accounts. Not paying attention to such matters can cause an account to fall through the cracks, leading to collection letters or maybe even filing a Summons & Complaint, (notifying you of a lawsuit). Being proactive with your debts is a crucial first step toward your debt-free life.

Should You Settle Your Debt?

Click here to learn more about debt settlement and what you can do to make the right choice >>

Legal Disclaimer: The content in this article is strictly for informational purposes; it is not legal advice and does not create an attorney-client relationship.

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Posted in Personal_Finance Post Date 08/10/2019