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How to Settle Your Debts in Alaska

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In a Nutshell

To determine whether a debt settlement can work for you, you’ll need to take a close look at your debts and your finances. Once you’ve learned how to do this, you can better judge whether a settlement plan is a better option than securing a debt consolidation loan or entering into a debt management plan.

Written by Upsolve Team
Updated December 20, 2023

Do you have an excess of unsecured debt consisting of credit card debt with high interest rates? Do you have an excessive amount of medical bills? Are your student loan payments having a crippling effect on your ability to make other debt payments and lower your outstanding balances? Have any of your creditors hired a collection agency to manage your debt? Are collection calls from debt collectors starting to border on harassment? Have creditors started to garnish your bank accounts? Is the repayment of delinquent income taxes to the IRS causing you to miss payments for other debts? If you’ve answered “yes” to any of these questions, know that you’re not alone and know that there are resources available to assist you during this period of financial hardship.

The Alaska debt settlement process may help you to return to financial stability, even if you have a low credit score. It involves reaching a settlement agreement with a creditor in which you pay a lump sum (usually less than the full amount of the debt) in exchange for partial debt forgiveness and the closure of your account. You can hire a debt settlement company to negotiate with your creditors or you can do it yourself. Debt settlement accomplished with the assistance of a for-profit debt settlement company usually involves making monthly payments into an escrow fund. Over time, the funds accumulate in the account and, when sufficient, are used to pay and settle your debts. It’s important to understand that this time-delayed type of debt relief can negatively affect your credit score, even if the creditor agrees to settle because your accounts remain delinquent for as long as it takes the process to unfold. 

If you’re still making your minimum payment every month, you’re really not the best candidate for debt settlement since creditors trust that you have the means to keep making your minimum payments and therefore have no incentive to settle with you. On the other hand, if you’re 60-90 days late, it may be time to think about settling your delinquent debt. If you have some cash available or can pool enough assets to pay a lump-sum (or make two or three installment payments), you may be in a good position to take advantage of a debt settlement. If your delinquent debt is secured or you have too few assets to make necessary settlement payments, you may have to consider some debt management alternatives. 

Learn More Through Free Nonprofit Credit Counseling 

Regardless of the amount of debt that you have, a credit counseling agency can serve as an excellent source of information about your debt management and relief options. You can talk to experienced credit counselors to learn about the benefits and drawbacks of debt negotiation and the debt settlement process.

You can schedule a private, no-cost credit counseling session with an experienced credit counselor at any time. You will leave your free session with a deeper understanding of your finances, their strengths, weaknesses, and how to achieve your financial goals. Consulting with a credit counseling agency that is a member of the National Foundation of Credit Counseling (NFCC), helps assure you that your credit counseling session will be tailored to your unique needs with no hidden agenda on the part of the agency you’re working with. 

How to Settle Your Debts in Alaska 

To determine whether a debt settlement can work for you, you’ll need to take a close look at your debts and your finances. Once you’ve learned how to do this, you can better judge whether a settlement plan is a better option than securing a debt consolidation loan or entering into a debt management plan.

Collect Details About Your Debts 

Before you crunch the numbers and determine your ability to settle your debts, you’ll need to collect details about each debt and your personal finances. Don’t exclude any debts, even those you may not want to settle, including student loans, so that a credit counseling agency or debt settlement company can get a complete picture of your current financial state. Relevant information, including the current debt amount, interest rate, and monthly payment amount, should be collected for each debt. A recent credit report will allow you to get a summary of each debt and its balance. Reviewing a complete list of the debts contained in your credit report is an excellent starting point in determining which debts are good candidates for settlement. This document will also let you know who “owns” your debts, in the event that any of them have been sold to collection agencies. 

Collect Details About Your Ability to Settle Your Debts 

Once you get a picture of your personal finances by estimating your monthly income and expenses as accurately as possible, you’re ready to consider whether a debt settlement will provide debt relief that will impact your financial situation for the better in any significant way. Determining income is easy for anyone with a regular job. Regular-wage earners need to look no further than their paycheck stubs. If you’re self-employed or your income varies from month-to-month for other reasons, this calculation may possibly be slightly more challenging. You may have to itemize every piece and source of income to get a complete and accurate estimate of monthly income.      

Expenses may be fixed - the same from month to month - or variable. Subtract the total amount of both categories of these expenses from your monthly income to arrive at the amount of your disposable income, which is the money that you have available to pay creditors. You can only complete the debt settlement process successfully if you have enough income available to make very short-term installment payments or to offer a lump sum settlement. If you don’t have much disposable income and you don’t have assets that you can sell to fund your settlement offers, you may be better served by a debt management alternative.

Learn About the Costs to Settle Your Debts in Alaska 

There are costs associated with settling your debts once they become delinquent. For example, a debt settlement company charges fees for its services. However, the alternative to hiring a debt settlement company (or to investing your own time and energy into negotiating with your creditors) is to do nothing and to continue to incur late fees and other penalties for any delinquent debts. A debt settlement will reduce or completely eliminate these types of fees and costs. However, keep in mind that a debt settlement company’s fees can be expensive if based on a percentage of total debt rather than based on the amount of money saved by the debt settlement. The latter fee arrangement is preferable and may give the debt settlement company more incentive to get the best result possible.

Decide Whether to Work with an Alaska Debt Settlement Company 

If you believe that debt settlement is a good option for you, you must decide whether to work with an Alaska debt settlement company or negotiate a debt settlement on your own. There are benefits to doing it yourself. Settling debts without a debt settlement company will save the fees that the debt settlement company charges for its services. Also, doing it yourself gives you complete control over the settlement process. However, negotiating your own debt settlement takes a significant amount of time and effort. You’re solely responsible for meeting every challenge as it occurs, which can be overwhelming and interfere with your daily life. You’ll likely have no ‘insider knowledge’ about creditors and what they typically accept for a debt settlement. There is no single “right” approach. The decision to hire a company or DIY your debt settlement is a matter of personal preference. 

Research Alaska Debt Settlement Companies 

Any debt relief company is required by law to give you certain information about its debt settlement program. This information includes the program’s price, terms, and timetable of results. A debt settlement company must explain all fees to clients. The company must also inform you how long it estimates that it will take before it will make a settlement offer to each creditor. This includes the amount of money or the percentage of each debt that must be accumulated into a fund before any payment is made to a creditor.

A debt settlement company must tell you about any possible negative consequences associated with this process, such as damage to your credit report and credit score, the possibility of a lawsuit, continued collection efforts, and that a creditor may charge you additional fees and interest for as long as your debt remains unsettled. The debt relief company also must inform you that you may withdraw your money at any time without penalty; that the accumulating funds are your property and you are entitled to any interest earned; and, that the account administrator is not affiliated with the debt relief provider and doesn’t receive any referral fees.

Any debt settlement company that makes guarantees or charges fees before doing anything may not be a reputable business. You may want to search the Alaska Attorney General’s Office website and its information on consumer protection before hiring a debt settlement company or any other type of debt relief company. The Alaska Consumer Protection Unit provides resources that consumers may find valuable to review. Consult with the Better Business Bureau or other consumer protection organizations to find out about trustworthy, qualified debt settlement companies. Also, be aware of your rights under federal law as third-party debt collection activity in Alaska is regulated by the Federal Debt Collection Practices (FDCPA), which is administered by the Federal Trade Commission (FTC).

How to Make Your Debt Settlement Work 

Considering all the hard work that you’ve done to put yourself in a position to realize some form of debt relief, it’s important to set your debt settlement process up for success. If you’re making installment payments, pick a manageable date when you know you can make each payment without any difficulty. You may want to separate the date of this payment from your larger monthly debt obligations, such as your mortgage, student loan, or rent payments.

When considering the use of any other credit cards while attempting a debt settlement, remember there is a risk that some of your creditors may look at this continued use of credit negatively. This may cause the creditor to reject your attempts to settle your debt at this time, especially if you take out new credit cards while attempting to settle your debt. 

Alternatives to Debt Settlement 

If you aren’t eligible for an Alaska debt settlement, you’re not out of debt management options. Alaska has a number of qualified credit counseling agencies to help you sort through the kinds of debt relief that are available. You may have more options than you think. Examine the benefits of each. Consider the drawbacks of each. When considering terms like “debt settlement,” “debt management,” and “debt consolidation,” it’s easy to get confused about exactly what makes each option unique. If you have questions, don’t panic. Just ask a nonprofit credit counseling agency for clarification. 

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Alaska Debt Consolidation 

When debt settlement isn’t a workable solution, it may be a good time to consider an Alaska debt consolidation loan. It can just as effectively solve your financial problems as a debt management plan or debt settlement. It may be possible for you to get a personal loan or HELOC to consolidate your unsecured debts. A debt consolidation loan substitutes one lump-sum payment for each of your debts monthly, eliminating multiple payments and due dates while simplifying your monthly debt service. You’ll use a new line of credit as a balance transfer to pay off your existing debt, leaving you with only a single account to manage. 

Alaska Debt Management Plan 

Along with debt consolidation, an Alaska debt management plan (DMP) may be something to ponder as a path to debt relief. Because a debt management plan is not a loan, you don’t need a high credit score to qualify for a DMP. You’ll make a regular, monthly payment to a credit counseling agency after it negotiates a repayment plan with your creditors. It will then distribute the payment you make each month to your creditors on your behalf.

Alaska Bankruptcy 

At some point in time, you should consider meeting with an experienced bankruptcy attorney to explore whether filing for bankruptcy is a good option for your situation. Most Alaska bankruptcy attorneys provide prospective bankruptcy clients with an initial consultation at no cost or obligation, which is an inexpensive, easy way to familiarize yourself with the bankruptcy process. Additionally, Upsolve provides numerous resources to help you file a Chapter 7 bankruptcy case. We have a library of vast resources online to help inform you about the process. We can also help connect you with an attorney conveniently located near you. For those who qualify, we can even help you file your bankruptcy case for free.

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