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How to Settle Your Debts in Arkansas

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In a Nutshell

The rest of this article will explain what you need to know to successfully navigate the debt settlement process and how to choose a reputable debt settlement company. It will also briefly discuss other debt management options available that may help you to improve your financial situation.

Written by Upsolve Team
Updated January 28, 2020

If you need to get back on the right track financially because you have an excess of unsecured debt, there are a number of resources available designed to help you achieve your debt management goals. An Arkansas debt settlement is one way to regain stability through debt relief. However, you have to be careful about either choosing a debt settlement company that is right for you or choosing to negotiate with your creditors on your own behalf.

A debt settlement allows you to repay your debts, especially unsecured debt, often at a fraction of the overall account balance. You can potentially pay as little as thirty cents on the dollar. Once you make a one-time lump-sum payment or payments based on a term settlement agreement, you’ll have one less creditor to deal with and one less debt to settle. Creditors like debt settlements that are short in length since the fewer the payments, the lower the risk of default.

After a debt settlement is negotiated, payments are made into a fund (if you’re not making a one-time lump payment). When the fund has reached the agreed-upon amount, the money is transferred to your creditor. Note that if a settlement is negotiated that requires you to make more than one payment into a fund, a creditor won’t receive any money while you’re making payments - the creditor only gets paid once your fund reaches its target goal. The creditor will continue to report missed payments to the credit bureaus, and eventually, the account may be sent to a collection agency, even if you’re in the middle of a settlement process. This is why you’ll probably want to avoid debt settlement if you can’t make your target within one to three payment periods. A debt settlement is optimal if cash is on hand or assets are readily available for liquidation. If your credit score has already fallen, debt settlement may be a particularly good option, especially if you’re more than 90 days behind on payments. 

Anyone can struggle when paying credit card debt, medical bills, income taxes, and loans. Such struggles can cause missed payments resulting in late fees, as well as unwanted contact by collection agencies and other debt collectors. When your debt is becoming unmanageable, it’s important to consider that you can negotiate a settlement plan with or without the help of a debt settlement company. 

If you choose to work with a debt settlement company, remember to disclose all of your creditors, debts, and important debt terms such as account balances, interest rates, and monthly payment amount when you meet with a debt settlement company so it can evaluate your financial situation and help you create the best payment plan possible. 

Learn More Through Free Nonprofit Credit Counseling 

Qualified, accredited, nonprofit credit counseling agencies have the training, expertise, and resources to help anyone interested in learning about their debt management options. If you’re in a difficult financial situation, it’s recommended that you arrange a free credit counseling session with an experienced credit counselor as soon as possible. Credit counselors can help you understand the pros and cons of pursuing debt settlement. Credit counseling agencies may offer additional services based on the results of a counseling session.

A free, one-on-one meeting with an experienced credit counselor will give you an overview of your debt management options. Once a credit counselor learns about your finances, they will create an action plan designed to help you achieve your financial goals. They will also recommend specific solutions to your challenges that may or may not include debt settlement. A free meeting with a credit counseling agency is an efficient way to learn more about your debt management options. 

How to Settle Your Debts in Arkansas 

The rest of this article will explain what you need to know to successfully navigate the debt settlement process and how to choose a reputable debt settlement company. It will also briefly discuss other debt management options available that may help you to improve your financial situation.

Collect the Details About Your Debts 

It’s necessary to collect certain, detailed information about each of your debts before committing to the debt settlement process. You don’t want to get a strong sense of all of your debt obligations, even if you don’t want to settle every account. By collecting this information proactively, you’ll be able to give a credit counseling agency and/or debt settlement company a complete picture of your current finances. With this information in hand, an agency or company will be able to ensure that the guidance you receive is based on the most accurate information possible.  

If you don’t already have a current copy of your credit report, obtain a free copy, and review it. Your credit report will provide you with a complete list of your debts. This information will prove helpful when you’re determining which debts to settle (and which you might like to consolidate). Each debt’s monthly account statement will contain more specific information about your debt’s current balance, interest rate, and monthly payment amount. 

Collect Details About Your Ability to Settle Your Debts 

To take advantage of a program offered by a debt settlement company, you either need some source of income that can help you quickly accumulate enough for a lump sum payment(s), or some assets that you can sell in a short time. When taking a good look at your income, you’ll need to assess whether you have access to reliable sources of money that will allow you to make installment payments on time every month that you’re saving to hit your fund target (if you’re not making a one-time lump sum payment). If you have a job where you’re paid regularly, twice a month, or every two weeks, determining income shouldn’t be difficult. If you’re self-employed or your income varies from month-to-month for other reasons, this calculation involves a bit of guesswork.

Next, consider your expenses, which you can distinguish by whether they’re fixed or variable. 

Fixed expenses are bills that are consistently the same from month-to-month. Student loan payments, cable, internet, and car insurance are some examples of fixed expenses. Variable expenses are more unpredictable and tend to change monthly. Groceries, gas, and recreation costs are types of variable expenses. You can better estimate these expenses if you review your statements from your bank account for the last 12 months and determine the monthly total average. Bank statements should provide a good annual overview of all your expenses, fixed and variable.

After accurately estimating your income as accurately as possible, subtract your final expense total. This is the amount of disposable income that you have available to pay any of your creditors. Now that you have all the facts - income, expenses, and disposable income - you can decide whether debt settlement will work for you. If your disposable income is low after doing all of the math, debt settlement may not be the best option, but that doesn’t mean you’re out of options.

Learn About the Costs to Settle Your Debts in Arkansas 

A debt settlement company can charge fees for its services but cannot charge any fees before it has settled or otherwise resolved your debts. A debt settlement company’s fees can be up to 20% of the debt. They can also be based on a percentage of total debt. Some companies charge based on the savings that their debt settlement program will provide to consumers. You’ll also want to consider the cost of any late fees and interest that may be tacked onto your overdue accounts if it will take you a few months to settle your debts. 

Decide Whether to Work with an Arkansas Debt Settlement Company 

An Arkansas debt settlement company can negotiate a debt settlement for you, but you can also do it yourself. This will save you the cost of the fees charged by a debt settlement company for its services. You can control all the decision-making, but you’re also on your own. This takes a lot of time. You have to consider whether DIYing your debt settlement will interfere with your daily life to the extent that it causes problems and disruption.

Research Arkansas Debt Settlement Companies 

Federal law requires debt relief companies to provide consumers with specific information about any debt settlement program that the debt relief company offers. This includes the price, terms, and an expected timetable of results. All fees and costs charged by the debt settlement company must be explained to consumers participating in a debt settlement program. A company must also tell you how much time it will take before a settlement offer is presented to each creditor. 

A debt settlement company is also required to tell you about any potential negative effects of a debt settlement, such as negative effects on your credit report and credit score, the possibility of a lawsuit, continued collection attempts, and that additional fees and interest may be charged by a creditor.

The debt relief company also must inform you about your rights to the money in your escrow account, and that you may withdraw your money at any time without penalty. Debt settlement companies that make guarantees or charge fees before performing any service are breaking the law and are not credible businesses. Consult with the Better Business Bureau or other consumer protection organizations to find out about trustworthy, qualified debt settlement companies. 

There are currently no specific laws governing the practice of debt settlement in the state of Arkansas. All debt falls under the federal jurisdiction of the Fair Debt Collection Practices Act (FDCPA), administered by the Federal Trade Commission (FTC). Consult the Arkansas Attorney General’s website to keep up to date on any changes affecting debt collection law.

How to Make Your Debt Settlement Work 

Once you or a debt settlement company has negotiated settlement of your debts, you have to make that settlement process work. You may have a regular payment that must be made every month on time and without fail. You’ve done a lot of hard work up until now. You need to follow through and finish the job. But remember, you’re not alone. Choose a workable time of the month when you know you can make the payment. This payment date shouldn’t be too close to your mortgage or rent payment date. When possible, save some money for a rainy day in an emergency fund. Make a budget entry for unexpected and expected one-time expenses so that they don’t catch you off guard and cause you to miss a debt settlement payment. 

Alternatives to Debt Settlement 

If an Arkansas debt settlement isn’t the best option for your financial situation, don’t panic. There are other options, such as debt consolidation and debt management, to consider. The following is a brief summary of alternatives to debt settlement that you may want to explore. There is no “one size fits all” solution to debt management, so it’s important to consider all of your options before committing to any particular opportunities.  

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Arkansas Debt Consolidation 

If debt settlement won’t work for you, you may want to consider securing an Arkansas debt consolidation loan to act as a balance transfer for your existing debts. Once your debts have been combined, you’ll only have to pay down that single, combined account. This process streamlines your debt and can potentially allow you to take advantage of better loan terms than you’re grappling with now. 

Arkansas Debt Management Plan 

Unlike debt consolidation, an Arkansas debt management plan does not require you to secure a new line of credit. You don’t need a high credit score to qualify for a debt management plan. You’ll need to work with a nonprofit credit counseling agency to construct a DMP. Once your repayment plan has been negotiated with your creditors, you will submit one payment a month to the agency. Then, the agency will pay your creditors with those funds, per the terms of your plan. 

Arkansas Bankruptcy 

It may be time to meet with a bankruptcy professional if the total amount of your debt is too overwhelming for debt settlement to serve as a viable option for you. Typically, Arkansas bankruptcy attorneys offer free no-cost bankruptcy consultations. If you can’t afford an attorney and your debt can’t be successfully managed via a debt management plan or by securing a debt consolidation loan, know that Upsolve helps people file for bankruptcy so that they can obtain a fresh start. 

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