What is debt settlement?Debt settlement is a common way to help people who are struggling with debt. It is an agreement made between a debtor and a creditor that allows the debtor to pay a reduced amount of money on the payment that is due rather than the full amount. The creditor then considers the payment as paid in full. Debt settlement often saves a debtor the trouble of having to file for bankruptcy and sometimes even lowers the amount of debt that they are in.
If a person gives money to a debt settlement company and puts that money in an escrow account but receives no response from the company about their money or if it went towards their debt payments, what should that person do?If money was deposited into an escrow account while the negotiations were to be made, then the money technically still belongs to the person who put the money in that account until it is sent to the creditors. If the person has a contract with the debt settlement company and requests a refund, then the company may be entitled to hold a certain amount of the money in the account for the services they provided. However, if no contract exists between the two, the person should receive their money back immediately. If the company refuses to give this refund, or does not respond within a certain amount of time, the person has a right to sue the company for withholding the person’s money. In this certain type of situation, it may be best to put all contact in righting so there is evidence if one does indeed decide to sue the company.
Can a person file for bankruptcy after making a debt settlement agreement?It is possible for a person to file for bankruptcy after making a debt settlement agreement. Although a debt settlement agreement with a creditor may help with the amount of debt that exists, it may still not be enough to get a person out of debt troubles. Filing for bankruptcy is considered to be a last resort of debt management. Once a person has filed for bankruptcy, the court then proceeds to give an order that states that the person does not have to repay certain debts to their creditors. The only downside to filing for bankruptcy is that it stays on a person’s credit record for a length of 10 years. This may make it difficult for a person to get credit, buy a house, receive life insurance, or sometimes even get a job.
Is debt settlement a good idea to pursue when a person has a lot of debt?Usually, debt settlement is not a good idea unless a person has a certain amount of money in the bank that they can offer to their creditor to negotiate a debt settlement agreement. If the creditor thinks that they will not receive more than what is offered, they will accept the proposed amount. The only time it is recommended to make a debt settlement agreement is if the person has a lot of cash in their account that they can use. Debt settlement agreements will still show up on a person’s credit report. Also, the amount of money that is not paid is taken as income to the person by the IRS and the person will be charged that amount on their taxes.
If a person is trying to pay their debts through a debt settlement company but receives a Summons from a collection agency about a particular bill that is owed and they will not do business with the debt settlement company, what can the person do to fix this issue?The first thing one should do in this situation is find out if they have a defense in the case. This would mean that the person should see if the collection agency has a right to collect the debt that is said to be owed. Once this answer has been provided, they should then send a response to the Summons. If the person knows that they do not have to pay the debt that the agency is stating that the person owes, then an answer to the Summons is not necessary. In this situation, if there is no other option for resolving this matter, filing for bankruptcy would clear the stated debt.
Debt settlement can be helpful in certain situations, and can be harmful in others. Depending on the situation that a person is in, and how much debt is owed to a creditor, a person may choose to make a debt settlement agreement to avoid filing for bankruptcy and to lower the amount of debt that they owe. Debt settlement can be very tricky, so when questions arise, it is best to ask the Experts.