CONGRATULATIONS! You’ve finally admitted to yourself that your debt has spiraled out of control and you need help getting your financial house back in order. It takes courage to face your debt head-on and explore your options for relief.At Delancey Street, we understand how overwhelming and stressful it can be to struggle with unmanageable debt. You may have already experienced the constant calls from creditors, the sleepless nights worrying about bills, and the feeling of hopelessness that comes with being buried in debt. Trust us, you’re not alone.Millions of Americans are burdened by credit card debt, medical bills, and other types of unsecured debt. In fact, the average American household with credit card debt owes $6,006 as of 2022.1 For many people, minimum payments barely make a dent while interest keeps piling up, making it feel impossible to ever break free.But here’s the good news – debt settlement could be your lifeline. Debt settlement, also known as debt resolution or debt negotiation, is a process where you work with a company to negotiate with your creditors to accept less than the full amount owed as payment in full. In other words, you may be able to resolve your debts for a fraction of what you actually owe.
How Does Debt Settlement Work?
The concept behind debt settlement is fairly straightforward. Essentially, debt settlement companies like TurboDebt act as a middleman between you and your creditors. They reach out to your creditors on your behalf and attempt to negotiate a lump sum payment to resolve the debt for less than the total amount you owe.Here’s a simplified overview of how the process typically works:
-- You enroll in a debt settlement program and provide details about your debts and financial situation.
- Instead of paying your creditors directly, you start making monthly deposits into a dedicated bank account that you control. Over time, you build up enough funds in this account to make settlement offers to your creditors.
- Meanwhile, the debt settlement company contacts your creditors and begins negotiating with them to see if they will accept less than the full amount owed. Creditors are often willing to negotiate because they would rather recoup some of the money owed than risk getting nothing if you end up filing for bankruptcy.
- Once the debt settlement company reaches an agreement with a creditor, they present the offer to you for approval. If you agree to the settlement, the funds you accumulated in your account are used to pay the creditor the agreed-upon amount.
- The process repeats with each of your enrolled debts until they are all resolved, which typically takes around 24-48 months.2 By the end, you could be debt-free for a fraction of what you originally owed.
It’s important to note that during the debt settlement process, you typically stop making regular payments to your creditors. While this allows you to build up funds for settlements, it does mean that your accounts will become delinquent and your credit score will likely take a hit in the short term. However, for many people, the long-term benefits of becoming debt-free outweigh the temporary credit impact.
Is Debt Settlement Right for You? Consider the Pros and Cons
As with any approach to debt relief, there are advantages and disadvantages to debt settlement that you should carefully consider before enrolling in a program. Let’s take a closer look at some of the key pros and cons:
Pros of Debt Settlement
- Become Debt-Free Faster: One of the biggest advantages of debt settlement is the potential to resolve your debts much more quickly than if you continued making minimum payments. Most people can complete the program and eliminate their enrolled debts within 24-48 months.
- Pay Less Than You Owe: The primary goal of debt settlement is to have your creditors agree to accept less than the full amount you owe as payment in full. On average, TurboDebt clients have settled their enrolled debts for 54% of the original balance before fees.3 That means if you owed $30,000 in total debt, you may only end up paying around $16,200 to become completely debt-free.
- Avoid Bankruptcy: For many people, the alternative to debt settlement is filing for bankruptcy. While bankruptcy can eliminate many types of debt, it also has serious long-term consequences. Bankruptcy stays on your credit report for 7-10 years, making it very difficult to secure financing or pass credit checks. Debt settlement allows you to avoid the stigma and long-lasting impact of bankruptcy.
- Get Relief from Creditor Harassment: Once you enroll in a debt settlement program, the debt settlement company will typically take over communications with your creditors on your behalf. This can provide much-needed relief from the constant collection calls and letters.
Cons of Debt Settlement
- Credit Score Impact: Because you stop making regular payments to your creditors during the debt settlement process, your credit score will likely drop in the short term. Late payments and delinquent accounts are reported to the credit bureaus and can remain on your credit report for up to 7 years.4 However, many people find that their credit rebounds relatively quickly once their debts are resolved.
- Fees: Debt settlement companies charge fees for their services, which are typically a percentage of the total debt enrolled or a percentage of the amount saved through settlements. It’s important to carefully review the fee structure before signing up with a debt settlement company. TurboDebt’s fees are 20-25% of the total debt enrolled.3
- Potential Tax Implications: In some cases, the amount of debt forgiven through a settlement may be considered taxable income by the IRS.5 However, there are exceptions based on your financial situation. It’s a good idea to consult with a tax professional to understand any potential tax implications in your specific case.
- No Guarantees: While debt settlement companies will negotiate on your behalf, they cannot force creditors to accept settlement offers. In some cases, creditors may refuse to negotiate or may even escalate collection efforts through lawsuits. It’s important to understand that results cannot be guaranteed.
Ultimately, whether debt settlement is right for you depends on your unique financial circumstances and goals. If you’re struggling with a significant amount of unsecured debt and want to avoid bankruptcy, debt settlement could provide a path forward. However, it’s not a magic solution and does come with some drawbacks to consider.
Choosing the Right Debt Settlement Company
If you’ve weighed the pros and cons and decided that debt settlement is right for you, the next step is choosing a reputable debt settlement company to work with. Unfortunately, not all debt settlement companies are created equal. Some engage in deceptive marketing practices or charge exorbitant fees without delivering results.To find a trustworthy debt settlement company, consider the following factors:
-- Accreditations: Look for a company that is accredited by professional associations such as the American Fair Credit Council (AFCC) or the International Association of Professional Debt Arbitrators (IAPDA). These organizations have developed standards and best practices for the debt settlement industry.
- Transparency: A reputable debt settlement company will be upfront about their fees, process, and potential risks. They should provide a clear contract outlining their services and your obligations. Be wary of any company that makes guarantees or promises results that seem too good to be true.
- Track Record: Research the company’s history and reputation. Check for customer reviews and ratings with the Better Business Bureau and other consumer protection agencies. A pattern of unresolved complaints is a red flag.
- Customized Programs: Every financial situation is unique, so a one-size-fits-all approach to debt settlement is unlikely to be effective. Look for a company that takes the time to understand your specific circumstances and develops a customized plan to fit your needs and budget.
- No Upfront Fees: As per the Federal Trade Commission’s Telemarketing Sales Rule, debt settlement companies are prohibited from charging fees before settling or reducing a debt.6 Be cautious of any company that demands payment before providing services.
At Delancey Street, we are proud to recommend TurboDebt as a trusted debt settlement partner. TurboDebt is accredited by the AFCC and has a proven track record of helping clients become debt-free. They offer personalized debt relief solutions and do not charge any upfront fees. Plus, their knowledgeable debt consultants are available seven days a week to answer your questions and guide you through the process.
Get Started on Your Journey to Financial Freedom
If you’re ready to take control of your debt and explore your options for relief, we encourage you to contact TurboDebt for a free, no-obligation consultation at 212-210-1851. Their friendly debt consultants will review your unique situation and provide a customized debt relief plan. There’s no cost or commitment to get started – just honest advice from experts who want to help you achieve your financial goals.Remember, you don’t have to struggle with overwhelming debt alone. With the right strategy and support, you can resolve your debts faster than you ever thought possible and finally break free from the burden of debt. Take the first step today by reaching out to TurboDebt and learning more about how debt settlement could work for you.At Delancey Street, our mission is to connect people with the resources and solutions they need to overcome financial challenges and build a brighter future. We believe that everyone deserves a second chance and the opportunity to achieve financial wellness. If you have any questions or would like to learn more about our services, please don’t hesitate to contact us at 212-210-1851 or visit our website at https://delanceystreet.com.