How to Settle Your Debts in Virginia

Collect the Details About Your Debts 

Start by taking an in-depth look at all of your debts. You’ll need to collect the details for each one, including your current interest rate, your monthly payment, and your current balance. As you're collecting the details for each debt, you should also be categorizing your debts. Remember that debt settlement is an option primarily for unsecured debts, but it’s still useful to have the information on all of your debts to be able to show a complete financial picture to your credit counselor, who will use this information to construct your personalized action plan. Now is the time to get a free copy of your credit report. This is an important effort, because it’s very common that credit card companies and other creditors to assign or sell off delinquent accounts to collection agencies or some other third party debt collector. Before you can settle your debts, you’ll need to know who “owns” them.

Collect Details About Your Ability to Settle Your Debts

Next, you’ll need to figure out whether you currently have the ability to settle your debts. Do you have access to money that can fund your settlement offers? Or can you set aside money for a month or two to save up a decent-sized lump sum? Resist any impulse to raid retirement accounts for this money which is never a good idea.   

Most people seeking debt relief don’t have extra money available, so your income and budget will probably determine your ability to enter a debt settlement program. When evaluating your income, you’ll want to assess some of your most recent pay stubs. For your expenses, you can start with your regular monthly bills and then determine an average for variable costs (like groceries). Once you’ve determined all your figures for the budget, subtract your expenses from your take-home income to see how much, if any, remains after all of your regular monthly payments have been made. If there's no extra money remaining, you won’t realistically be able to save for debt settlements unless you sell some of your assets. As a result, you might want to think about entering into a debt management plan or filing for Chapter 7 bankruptcy instead. If there's extra money left over, you can figure out how long it’ll take you to save up for settlement offers. If you can’t save enough for an offer within a month or two, debt settlement probably isn’t the best option available to you at this time. 

Learn About the Costs to Settle Your Debts in Virginia

You will incur costs with any debt settlement process, regardless of whether or not you hire a Virginia debt settlement company to help you with your negotiations. This will include late fees and any other fees or penalties that will result from late or non-payments. If you do decide to hire a Virginia debt settlement company to help you, you’ll also have to account for their fees. Usually, the fees will be based on a percentage that can vary. At the most expensive end, this would be a percentage of the full amount of your debt. If possible, it’s best to find a Virginia debt settlement company that charges a percentage of the total amount that you ultimately save with your settlements. This creates a great incentive for your Virginia debt settlement company to get you the best possible deals with each creditor. If part of the debt settlement process involves setting up an escrow account for monthly payments, you’ll also be responsible for any fees related to that bank account. You should only be charged a portion of the total fees as each settlement agreement is reached. If a Virginia debt settlement company tries to get its fees upfront before reaching any agreements, you shouldn’t hire them. 

Decide Whether to Work with a Virginia Debt Settlement Company

You don’t have to hire a Virginia debt settlement company. Anyone can settle debts directly with their creditors. This might be a good option for you if you’re organized, detail-oriented, and unafraid to tackle your own debt negotiation process. There are benefits to pursuing debt settlement yourself beyond avoiding fees or maintaining control over the process. A DIY approach also means you don’t have to worry about disreputable companies exploiting your situation in ways that might get you into worse financial trouble. You’ll also have the opportunity to potentially settle with creditors who otherwise have a policy of not working with debt settlement companies. 

There are, however, also a lot of great benefits to working with a reputable Virginia debt settlement company if this is the way that you prefer to move forward. Most reputable debt settlement companies have established relationships with creditors, which means they can reasonably estimate both the amounts you’ll need for settlement offers and the time it will take to reach agreements. This insider information can be very valuable because it gives you a framework you wouldn’t otherwise have on your own. 

Research Virginia Debt Settlement Companies

You can minimize the risks of being taken advantage of by a predatory company by conducting some research before signing on with a specific Virginia debt settlement enterprise. A Virginia debt settlement company must provide you with specific information; if they don’t, look elsewhere. This information includes price and terms, an estimate for results (both monetary and timing) and negative consequences you’ll face by stopping payments in the meantime. The catch-22 to debt settlements is that if you’re current on payments, your creditors have no incentive to accept settlement offers. With that said, as soon as you stop making payments you’ll take a hit on your credit score, start incurring late fees and face more aggressive harassment from creditors. Unfortunately, this is an unavoidable part of the process, but a reputable debt relief company will help you understand what to expect. 

You should be immediately suspicious of any company that offers guarantees. No creditor has any obligation to settle, so there are no real guarantees to be had. If a company is pushing a “new government program” that may also be a red flag. If the company tells you to stop payments and cut off contact with your creditors before you actually set up a plan, this is also a red flag. And any company that charges its fees before you’ve reached any settlement agreements should be avoided. 

You can find out more information about Virginia debt settlement companies from trusted sources, like the Virginia attorney general’s office. They have information available related to consumer protection under citizen resources, where you can find protection laws, information on current scams and check for complaints. You can also check with the Better Business Bureau to see whether complaints have been filed against a company in the past. 

How to Make Your Debt Settlement Work

You can follow some best practices to help make your debt settlement work as soon as you decide to move forward. First, if part of your process involves making a monthly payment toward lump sum savings, be sure to set that up for a day of the month that works for you. Usually, this means avoiding the first of the month and any other dates when other large bills are already due. It’s always ok to make extra payments if you come into extra money like your income tax return. You won’t be penalized for an early payment and providing an early payment could help save you money on late fees and other penalties as your accounts remain in non-payment status. 

Alternatives to Debt Settlement

Debt settlement is one of several debt relief options that you can pursue. It may not, however, be the best option for you based on your current circumstances. There is no one right solution for debt management. It always comes down to what is best for you, as an individual, at this point in time.