How to Settle Your Debts in Florida

Collect the Details About Your Debts

The more you know about all available debt-relief options, whether debt management, debt consolidation, or debt settlement, the more information you have on which to base your final decision. Begin this process by gathering details about your debts. A vital tool is your credit report which, along with your current credit score, is available from any of the three credit bureaus. Florida residents are entitled to one free credit report every 12 months. 

Review your credit report for all your different types of debt, whether unsecured debt, like credit cards, secured debt, like auto loans, or other types of debt, like taxes and federal student loans. The most recent account statement for any debt should show the outstanding balance, interest rate, monthly payment amount, and the date of your last payment. Constructing a complete picture of your financial situation will help determine which debts may be a good fit for debt settlement.

Gather the paperwork that contains the relevant details about all your debts, not just your unsecured debts, but also concerning debts that you don’t plan on settling like mortgages or income taxes. Calculate each debt category’s monthly minimum payment totals. 

Once you’ve reviewed your credit report, you’ll have some information that can help you decide which debt is best for settlement. This information can also put you in a better position to consider other debt-relief options like debt consolidation and debt management. You’ll know which monthly payments you may be able to continue to afford and which you need to reduce or reorganize through a debt management option.

Collect Details About Your Ability to Settle Your Debts

Any money you receive regularly must be considered when determining income for purposes of a budget. If you can’t afford a lump-sum payment or monthly installment payments, your debt settlement will fail. If you earn wages regularly, estimating income for a budget shouldn’t be difficult. If you receive income from non-employment sources like alimony, it will require a more detailed examination of sources and receipts to estimate how much money you can expect to have available to you on a regular basis.

Next, consider your monthly fixed and variable expenses. Fixed expenses remain the same from month-to-month. Cable, internet, car insurance are examples of fixed expenses. Variable expenses like groceries and gas fluctuate monthly for various reasons. Estimate your expenses by reviewing your bank statements for the last three months and then divide the total by three. 

Any minimum monthly debt payments that you plan on continuing to pay should be included in this calculation of expenses for budgetary purposes. But don’t include any minimum monthly debt payments for debts that will be paid into any fund under a debt settlement, debt consolidation, or debt management plan. At some point, you may have to revise this to account for any debts, like student loan payments, that you don’t settle, consolidate, or pay pursuant to a debt management plan.

The total amount remaining after you subtract expenses from income is your disposable income, which represents the money available to pay into any settlement fund. If this total is insufficient, you’ll have to consider other debt-relief options, like debt management or debt consolidation. If you don’t have enough monthly disposable income to cover your expenses, a Chapter 7 bankruptcy might be your best option.

Learn About the Costs to Settle Your Debts in Florida

One purpose of a debt settlement is to eliminate or reduce late fees and penalties related to default. There’s a cost involved in how you settle your debts. Whether you use a debt settlement company or take responsibility for debt negotiations yourself, both carry consequences that cause you to pay money out-of-pocket.

In addition to late fees and penalties, there are the costs that you will incur if you hire a debt settlement company. These include the fees paid for the company’s services and any bank fees. However, keep in mind that the funds in the account, as well as any interest that accrues, are your property and that you are legally allowed to access them at any time.

A debt settlement company’s fee may be calculated based on a percentage of your total debt or a percentage of your debt savings. A fee based on the amount of debt that you save gives the debt settlement company an increased incentive to get the job done.

Decide Whether to Work With a Florida Debt Settlement Company

If you are organized, skilled on a computer, and love to talk and argue, you can choose to settle your debts directly with your creditors and avoid the fees charged by a debt settlement company. Not only will you save the costs of hiring a debt settlement company, but you will assume complete control over every step of the debt settlement process.

The drawback of this approach is that you will need to expend a significant amount of time and effort. It will be your ultimate responsibility to keep track of everything that’s happening with your debt settlement. If you handle the debt settlement negotiations personally, you may lack time to deal with every single creditor.

Also, debt settlement companies are much more experienced in settling debts than the average consumer. These companies possess the ‘insider knowledge’ of what a creditor typically accepts, and they can provide necessary guidance throughout the process. However, be wary of those that charge fees upfront.

Research Florida Debt Settlement Companies

In Florida, a debt management service or credit counseling service may not charge a fee greater than $50 for their initial setup or consultation. Subsequently, they may not charge or accept a fee or greater than $120 per year for additional consultations. Any person engaged in credit counseling or debt management services is prohibited from charging fees in Florida in excess of the greater of 7.5 percent of the amount paid monthly by the debtor or $35 per month. A consumer charged excessive fees may bring an action for damages, costs, and attorney’s fees.

Any person engaged in debt management or credit counseling services must distribute to the appropriate creditors all funds received from a debtor, less any permitted fees and creditor contributions, within 30 days after receipt. Further, any person engaged in debt management services must maintain a separate trust account for the receipt of any funds from clients and the disbursement of any funds on their behalf.

Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) was passed in 1973 to protect consumers. Check the Florida Attorney General’s website for more information about consumer protection. The Better Business Bureau and other consumer protection organizations can help you learn more. The Federal Trade Commission (FTC) website also contains valuable resources for consumers.

How to Make Your Debt Settlement Work

A month should never go by where your debt settlement payment schedule isn’t current. Failure to honor your “end of the bargain” can result in termination of your debt settlement agreement. The due date of any monthly payment related to a debt settlement is a day especially worth noting on your calendar. Separating this date from a mortgage or rent payment to balance making large debt payments over the course of the month and avoiding large outlays of cash at one time is a wise course of action. Any extra, unexpected money that you earn or obtain may be used for making extra payments into your settlement bank account.

Alternatives to Debt Settlement

There are other money management and debt relief alternatives available if a debt settlement plan isn’t the right solution for your situation. You may need to consider other alternatives because of your amount of debt and the types of debt you owe. But don’t give up! There are other effective options available to help you succeed. Credit counseling agencies can help you learn about other debt-relief options, such as debt consolidation and bankruptcy. Meeting with a CCA is beneficial because they’ll make your decisions better informed going forward.