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How to Settle Your Debts in Georgia

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In a Nutshell

Now that you have a better understanding of debt settlement and whether it may be right for you, let’s look at what’s next. Whether you choose to settle your debts on your own or with the help of a Georgia debt settlement company, the information below can help you protect your rights, and help you get your financial situation back on track as soon as possible. 

Written by Amy Carst.  
Updated January 3, 2020


If you feel overwhelmed by debt, you’re not alone. According to a recent survey by Bankrate, three out of 10 Americans have more credit card debt than emergency savings. But knowing that you’re in good company doesn’t make excessive debt any less stressful. It can even affect your health. 

Fortunately, it doesn’t have to be that way. Debt settlement, which involves paying less than the total amount owed, is one option for debt relief. 

The debt settlement process can be structured as a one-time lump sum payment, or in the form of smaller, monthly payments. These plans can be set up through a Georgia debt settlement company, but many people choose to negotiate a settlement on their own. 

It may seem counterintuitive for creditors to accept less than the amount actually owed, but keep in mind that customers who stop making debt payments are merely a statistic. Your reduced settlement will barely have an impact on the creditor, but struggling to pay off a debt can severely impact your overall wellbeing.

But are you a good candidate? If you are current on payments or you have assets to cover the full amount owed, debt settlement probably isn’t a good option. Creditors won’t agree to take a lesser amount when they know you can afford to pay your debt in full. If the scenarios below apply to you, however, you may be a good candidate for debt settlement:

  • You have the ability to gather enough money to make a lump sum payment, or smaller, monthly payments over a short period of time. 

  • You have a manageable number of creditors. 

  • You are 90 days or more behind on payments. 

  • You do not have the ability to pay back the full debt owed. 

  • You understand that debt settlement has a negative impact on your credit score. 

In most cases, Georgia debt settlement companies will require you to make monthly payments into an escrow account over a period of time. The accumulated funds will then be used to settle with each creditor, usually in the form of a lump sum payment. 

Working with a debt settlement company has multiple benefits, including eliminating your need to deal with creditors on your own. The company will negotiate a reasonable settlement on your behalf, and all you have to do is make the agreed upon payments. That being said, it is possible to reach settlements with creditors on your own. If you only have a few creditors, you may wish to contact those creditors on your own to negotiate a settlement you are comfortable with. 

Although there are scams out there, many debt settlement companies are reputable and really want to help people get back on their feet. Just be sure to do your homework prior to deciding whether to work with a particular company, and review the company’s credentials before moving forward. 

Learn More Through Free Nonprofit Credit Counseling

Anyone with debts they are struggling to pay can benefit from credit counseling. Credit counseling agencies, which always offer a free initial counseling session, provide debt management plans, not debt consolidation loans. This is an important distinction; credit agencies are not banks. 

Prior to entering into a debt settlement arrangement, either on your own or with the help of a debt settlement company, it is wise to take advantage of free credit counseling offered by a credit agency.  

What Happens During Credit Counseling? 

At the initial counseling session, the credit counselor will thoroughly assess your financial situation, including credit score, secured vs. unsecured debts, types of debts (federal student loans, medical bills, credit card debt), interest rates, disposable income and tax consequences, to determine the best strategy for moving forward. As part of the session you will: 

  • Receive a financial assessment from a counselor trained in money management. 

  • Find out if debt settlement is a good option for you. 

  • Establish short and long-term financial goals. 

  • Receive an action plan for achieving those goals. 

Your credit counselor will make a recommendation at the conclusion of your session. Of course, it is up to you whether to follow the counselor’s advice. If you wish to settle with your creditors, and the counselor does not feel that debt settlement is a viable option, you can still choose to pursue this particular strategy. That being said, it may be in your best interest to ask the counselor why they did not include debt settlement as part of your action plan. 

How to Settle Your Debts in Georgia

Now that you have a better understanding of debt settlement and whether it may be right for you, let’s look at what’s next. Whether you choose to settle your debts on your own or with the help of a Georgia debt settlement company, the information below can help you protect your rights, and help you get your financial situation back on track as soon as possible.


Collect the Details About Your Debts 

Step one is to gather as much information as possible about your debts and overall financial situation. Although recent credit card and loan statements for debts you wish to settle are especially important, information about loans you do not wish to settle can help to paint a more accurate version of your bigger financial picture. Statements include important information, including current interest rates, outstanding balances, monthly payments, types of debts (student loans, credit cards, medical bills), and whether or not the loan is a secured or unsecured debt. 

It is also helpful to obtain a copy of your credit report prior to working with a credit counselor or debt settlement company. When a person defaults on their loans, it is common for the loans to be sold to another creditor. This updated information is necessary so that the person negotiating with creditors knows who to contact. A credit report also provides a comprehensive look at all of your liabilities and creditors, as well as your FICO credit score. 

Collect Details About Your Ability to Settle Your Debts

In order to effectively negotiate with creditors, it’s important to first determine your ability to settle each of your debts. In doing so, your income is just as important as knowing how much debt you have. But what qualifies as income? For example, if you are unemployed but receiving social security benefits, does this compensation count as income? 

Although social security benefits are protected from creditors, other forms of income from non-employment sources may not be. Furthermore, compensation doesn’t have to be taxable income to count. Generally speaking, if you have money available to cover living expenses, it will be considered as income. And any money that remains after you have paid living expenses is your disposable income. The information you should gather to accurately determine your monthly income and disposable income includes: 

  • Two recent paycheck stubs (should be representative of a typical work week, not low due to excessive time off or high due to lots of overtime)

  • Information about spouse’s income

  • Debts

  • Community debts with spouse (co-signed loans, etc.)

  • Fixed costs, such as rent, car insurance, internet

  • Variable costs, such as groceries, entertainment, fuel 

By gathering this information, you can determine your disposable income, which is the amount of money you have left after paying expenses and debts. This is what you can afford to pay to your creditors in a debt settlement arrangement. Unfortunately, if you have no money left after paying for living expenses, a debt settlement arrangement may not work for you.

Learn About the Costs to Settle Your Debts in Georgia 

Regardless of what route you choose—debt settlement company or settling on your own—you will incur certain costs. These are likely to include late fees on past due accounts or those you defaulted on, and other penalties related to default. If you choose to work with a Georgia debt settlement company, you will also pay fees for their services. These may include: 

  • Bank fees for depositing monthly payments into an escrow account.

  • Debt settlement fees based on total debt if you owe a lot. 

  • Debt settlement fees based on total savings if you don’t owe a lot. 

Debt settlement companies structure their fees differently, but certain rules apply. For starters, the company can only charge a portion of the full fee prior to settling a debt. Once the debt is settled, the company can charge you the remainder of its fee. Furthermore, if the company charges a contingency fee based on your savings, it must disclose the percentage of debt it charges as a fee, as well as what this amounts to in dollars. 

Decide Whether to Work with a Georgia Debt Settlement Company

As stated above, you can choose to settle debts on your own, without the help of a Georgia debt settlement company. In some cases, it may actually be in your best interest to go it alone. If you are organized, computer savvy, and unafraid of negotiating with creditors, you may be a good candidate for self-directed debt settlement. The pros and cons of doing it yourself include:

Pros: 

  • No debt settlement company fees

  • Maintain complete control

  • Ability to settle with creditors who refuse to work with debt settlement companies

Cons:

  • Doing it alone can be time intensive and overwhelming

  • Lack of insider knowledge about how to negotiate with creditors

  • No one to give advice or tell you if you’re doing something incorrectly

Research Georgia Debt Settlement Companies

If you choose to work with a debt settlement company, make sure to research different companies before deciding on one. Debt settlement companies are required to give you information about their programs. This information includes pricing, terms and conditions, how long they estimate it will take to settle with each creditor, and potential negative consequences of debt settlement, such as a lowered credit score, additional creditor fees and interest, and the possibility of getting sued. You may also continue to receive collection calls from creditors and collection agencies while you are making escrow payments to a debt settlement company. 

Although many debt settlement companies are highly reputable, scams do exist. Do your homework. You can search for complaints about a debt settlement company withGeorgia’s Attorney General, or through the Better Business Bureau’s website.

How to Make Your Debt Settlement Work

Once you’ve entered into a debt settlement arrangement, it’s important to ensure that the arrangement is working for you. Are the payments being made as agreed upon? Does the payment due date make sense? The tips below can dramatically improve your chances of success. 

  • Select a due date that does not coincide with your mortgage payment or other large monthly expense. 

  • Budget for unforeseen expenses and other large one-time expenses, such as car inspections or annual registration. 

  • Reward yourself when a settlement arrangement with one of your creditors is paid in full.  

  • If you can make extra payments, do it. 

Keep in mind that leaving some credit cards open while settling other cards carries risks, especially if you have multiple cards with one bank. If the bank sees that you are struggling to pay the higher-balance cards, it may close even low-balance cards you are current on. Even if you have credit cards with a zero balance, your limits may be dramatically reduced, or the cards may be closed, if the credit card company finds out you are settling with other creditors. Furthermore, if creditors discover that you are settling with other banks, this knowledge may be used to negatively impact future settlement offers.

Alternatives to Debt Settlement

Although debt settlement arrangements can provide protection and debt relief to many individuals who are in over their heads, these programs are not for everyone. If after reading this article or completing a credit counseling session, you believe that debt settlement is not right for you, consider some alternatives. The sections below provide information on different types of debt management and consolidation. Depending on your unique circumstances, one of these programs may be a good option for you. 

Georgia Debt Consolidation

Debt settlement programs do not involve the borrowing of money and are, therefore, not contingent on having a good credit score. Debt consolidation loans, however, are a different story. Georgia debt consolidation involves combining multiple outstanding debts into one larger loan. But in order to qualify for this type of debt consolidation, you must have good credit. Debt consolidation loans may be a good option if you have enough money to make a smaller monthly payment once your loans have been consolidated, and you have good to excellent credit. 

Georgia Debt Management Plan

While debt settlement plans allow you to settle debts for less than the total amount owed,debt management plans (DMPs) allow you to pay off debts, in full, on a schedule you can afford. With a DMP, you make monthly payments that are passed directly to your creditors, unlike debt settlement arrangements which pay nothing to creditors until you have accrued a certain amount in a settlement fund. DMPs are better for your credit rating because creditors will stop reporting missed payments to credit bureaus if you’re making timely payments with a DMP. 

Georgia Bankruptcy

Although bankruptcy should be the last resort for individuals who are struggling to pay their debts, if your income isn’t enough to cover your basic living expenses, nevermind make payments to creditors, it may be the best option. Fortunately, most bankruptcy lawyers offer a free initial consultation. If you have determined, after consulting with a credit counselor, that bankruptcy may be the best route for you, take advantage of a local attorney’s free initial consultation. 

If you are considering bankruptcy but can’t afford an attorney, Upsolve can help. We are a government-funded non-profit that helps low-income individuals file for Chapter 7 bankruptcy. If you need assistance with your Georgia bankruptcy, visit our website for more information today.



Written By:

Amy Carst

LinkedIn

Amy Carst is a writer, human rights activist, and speaker. She has written for US News & World Reports, Vice, and various Vermont news publications. She writes for multiple law firms and human rights organizations and studied law until she realized she’d rather write for attorney... read more about Amy Carst

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