How to Settle Your Debts in Delaware

Collect Details About Your Debts 

Next, collect all the important information about your individual secured and unsecured debts. Gather the monthly totals for each debt category. Recent account statements will contain each of your debts’ current outstanding balance, interest rate, and monthly payment amount. Review these statements for each of your debts, even those you may not want to settle, like auto loans, income taxes, and federal student loans. 

Also, obtain a current credit report from the three credit bureaus and review it in detail. You want to be able to give both your credit counselor and your creditors a comprehensive sense of your financial situation. The more information that your credit counselor and/or a debt relief company has about your debts, the better it can evaluate your needs, find solutions, and help you to manage your debt. It will also help make you more informed and place you in a better position to move forward and consider whether alternative options like debt consolidation and debt management might be right for you. 

Collect Details About Your Ability to Settle Your Debts 

Just as expenses may be fixed or variable, income can be as well. If you always work forty hours a week, no more, no less, and earn a fixed hourly wage, it’s easy to determine income for the purposes of creating a budget. If you’re self-employed and some weeks are better than others, then it’s more difficult to determine the income that’s representative of a typical work week. No matter what your income situation looks like, you’ll want to evaluate what your income will consist of for the next few months so that you can determine whether you can afford to offer debt settlements to any of your creditors. 

After you have a clear picture of what your income is every month, consider your expenses, which you can separate by those that are fixed and those that are variable. Fixed expenses are costs whose monthly payment amounts don’t fluctuate. Student loan payments, cable, internet, car insurance are some examples. Variable expenses change monthly based on need. Groceries, gas, and recreation costs are variable expenses. You may be able to cut back on some of these expenses while funding settlement offers, but you may not. Everyone’s financial situation is unique. 

Whatever amount of money remains after subtracting your expenses from your income is the amount of disposable income you have available to pay creditors. If you don’t have enough disposable income to make a debt settlement work (and you don’t have any property to sell or assets to pull to fund your offers), you may have to consider other options, like debt management or debt consolidation.

Learn About the Costs to Settle Your Debts in Delaware 

There are costs that you will incur if you move forward with the debt settlement process, whether you hire a debt settlement company or not. Late fees and penalties continue to accrue as you consider your options for debt relief. Then there are the associated costs if you hire a debt settlement company, such as the fees paid for its services and any other fees associated with the debt negotiations. Whether you use a debt settlement company or assume debt negotiations yourself, the more time you spend waiting to make any decision, the more it will cost you.

Federal law prohibits debt settlement companies from collecting fees until they have settled a debt. Some companies’ fees are based on a percentage of total debt, while other fees are based on the money saved by the debt settlement program. This second option is ideal because it provides debt settlement companies with motivation to secure the best deal possible on behalf of their clients. 

Decide Whether to Work with a Delaware Debt Settlement Company 

There’s no reason that you can’t achieve a settlement of your debts by yourself instead of using a third-party debt relief company, if that is the approach you’d like to take. Unlike a debt consolidation, where you need a new loan to make the process work, you just need to invest time and effort to settle your debts if your creditors are amenable to making a deal. You’ll save any fees incurred by hiring a debt settlement company, and you’ll control all debt settlement negotiations.

With that said, a drawback is that you will have no insider knowledge about your creditors and what amount/fraction they’re likely to accept as a lump sum settlement. Also, a debt settlement company has the experience in debt settlement matters that you lack. Debt negotiation is stressful and time intensive. If you’re willing to spend a little extra money, you may want to hire the services of a reputable debt settlement company. There is no “right” decision; you should do whatever makes the most sense for you.

Research Delaware Debt Settlement Companies 

By law, debt settlement companies must disclose key features of their services, including the length of time necessary to get results, the cost, the negative effects of using a service for debt relief, and other important information. Providers of debt management services in Delaware must act in good faith when performing any service. This means that they violate Delaware law if they perform any service for a purpose other than to benefit clients. Delaware debt management companies must be licensed and maintain a toll-free phone number, staffed at a level that reasonably allows consumers to speak to a certified counselor or customer service representative during ordinary business hours.

Before providing debt-management services, licensed providers must give clients an itemized list of services and fees. The list must be clear and conspicuous and in a form that clients may keep regardless of whether they agree to services. The maximum fee for a Delaware debt settlement is 18% of the principal amount of the debt and includes all set-up, monthly, and settlement fees. A provider may not furnish debt-management services unless it, through the services of a certified counselor:

• educates clients about personal finance management; 

• prepares a financial analysis; and, 

• if the client is to make regular debt payments, has prepared a plan based on the provider’s evaluation and conclusion of the information provided by the client and otherwise, that:

• • the plan is suitable; 

  • the client will be able to make payments under the plan or that the creditor can engage in debt negotiations with the provider; and 

  • participating creditors in the plan will accept payment of the individual’s debts.

Debt collection is regulated by the Fair Debt Collection Practices Act (FDCPA), administered by the Federal Trade Commission (FTC). Consult with the Better Business Bureau and Delaware Attorney General’s website for more information on consumer protection and debt services in Delaware. Doing your research now will help to ensure that any debt settlement company you choose to work with isn’t a front for a scam. 

How to Make Your Debt Settlement Work 

If you’re making your debt settlement payments via installment, it’s important to pick a logical, workable, monthly payment date, which is different than the date your mortgage or rent payment (or any other major expense) is due.

You can also use a credit card with a reasonable interest rate to pay for any unexpected expense that may arise as you’re focusing your efforts on funding settlement offers, and minimize the effect on your budget by repaying it as soon as possible through a short monthly payment plan. Remember that this use of credit cards while settling accounts with other banks may be seen by a creditor in a negative light, which may impact any settlement offers that you receive, so walk cautiously here. 

Alternatives to Debt Settlement 

Terms like “debt settlement,” “debt management,” and “debt consolidation” can be intimidating, but they shouldn’t be. Each of these terms represents a debt management solution that can help struggling individuals regain their financial footing. If you can’t find a debt settlement program that works, or maybe you just don’t qualify for a Delaware debt settlement, there are other solutions that may still help you find debt relief, even if you have a low credit score. 

There are many qualified credit counseling agencies in Delaware that can provide more information about debt consolidation or debt management plans. There’s also a wealth of free assistance available online and near you in Delaware. Even if debt settlement isn’t the best option for you, there are others available for you to consider.