How To Settle Your Debts in Minnesota

Collect Details About Your Debts 

The first step to making sure your debt settlement starts smoothly is collecting all of your financial documents. You will want to know how much debt you have, the interest rate, and your current monthly payment for each. Having copies of your most recent statements is essential to knowing where you stand. You will also want to categorize the different types of debts you have, like unsecured debt, secured debt, student loans and medical bills. Have a complete financial picture for yourself so that when you speak with your creditors, you will be knowledgeable about your situation. This will help you explain your financial situation clearly and efficiently. Get a copy of a free credit report if you need help organizing your debt. Keep in mind that your accounts may be with different companies than you originally got the loan or credit card from. It’s common for banks to assign or sell delinquent accounts to collection agencies or other third-party debt collectors, so the names may appear different on your credit report than what you expected. 

Collect Details About Your Ability to Settle Your Debts 

The best settlements are usually lump sum settlements. If you can’t do this, you’ll need to be able to pay the settlement amount in monthly payments over a short period. To make sure that your debt settlement works, you’ll need to know your income and expenses and how much you have available to put away to make reasonable settlement offers. As you go through your income, you should look at your taxes, your spouse’s income, and any other sources of income from family members. You should know that if you’re on social security/ disability your income is protected from creditors. Meaning, they will not be able to garnish your social security income for non-payment. Make sure to not include overtime in your monthly income; otherwise, you’re setting yourself up for failure. Go through your expenses with a fine tooth comb and make sure you have accounted for everything. Don’t forget to include a small fund for emergencies. If you don’t have enough to put away each month, then you should avoid trying a debt settlement. It’s never a good idea to withdraw money from your retirement to pay your bills. Wiping out your retirement account can cause a hefty tax bill and leave you with nothing when it is time to retire. If you are considering this, you should look into bankruptcy first, as you can protect your retirement accounts in a bankruptcy. 

Learn About the Costs to Settle Your Debts in Minnesota

Unfortunately, debt settlement is not free. You will incur costs, whether you handle debt negotiation on your own or whether you work with a Minnesota debt settlement company. Some of these costs will include late fees on your accounts as well as penalties as your account continues to default. If you choose to work with a Minnesota debt settlement company, you will need to find out about what fees you will be charged up front. Usually, debt settlement companies take out a percentage of your total debt owed. Some companies even charge a percentage of the total amount settled (or saved) at the end. You should always try to hire a Minnesota debt settlement company that collects their fees at the end based on the amount they save you. This will entice them to get you a better settlement and save you money. The only time you should only be charged any fee is after a debt is settled. If a Minnesota debt settlement company tries to charge you before reaching any settlement agreements, run the other way! Sometimes, there are even fees associated with a bank account, if the Minnesota debt settlement company requires an escrow account where you will put your monthly savings into. 

Decide Whether to Work with a Minnesota Debt Settlement Company 

Don’t listen to any company that tells you that you have to hire a debt settlement company in order to settle your debts. You don't need to hire a Minnesota debt settlement company to pursue debt settlements. As long as you’re organized and comfortable making uncomfortable phone calls, you can settle debts directly with your creditors without needing to hire a company.  This can be quite time consuming and daunting for some people, but if you stay organized and put some time aside each day to settle your debts, you can do it! Handling it yourself can save you money and keep you in control of your financial situation. If you decide you want to work with a Minnesota debt settlement company that’s okay too. Many debt settlement companies have inside knowledge and know how to speak with debt collection companies, since they do it almost every single day. One advantage of hiring a debt settlement company is they may know which creditors might be difficult to deal with and how to escalate the conversation to someone who can help get you a better deal on your settlement. Also, if you don’t want to hire a debt settlement company to help you, you can also look into hiring an attorney to settle your debts for you. 

Research Minnesota Debt Settlement Companies 

To help ensure that you're finding a reputable Minnesota debt settlement company, there is some initial research you should do. First, educate yourself on what information a Minnesota debt settlement must be open about. They must be upfront about their price and their terms. They also must give you a time frame for how long this process will take and provide you with an estimate with how much you'll need to save before they make any offers; all without making guarantees. They should also go into detail about what will happen as you continue to become delinquent on your accounts. They should tell you that being delinquent on your accounts may end up with a possible lawsuits against you by your creditors. To avoid ending up with a company that is a scam look out for these warning signs by any Minnesota debt settlement company:

• They guarantee they will get you settlements (no creditor has to agree to any settlement).

• They hype a “new government program.” 

• They tell you to stop communicating with your creditors. 

• They try to get payments from you before a settlement is reached. 

• They have negative reviews. 

• They are trying to sell you something rather than really caring about your financial situation. 

• They don’t look at your finances but just offer to sign you up. 

To make sure the company you’re dealing with is reputable, check the Minnesota attorney general’s office for any complaints. The Consumer Protection department is another good resource to look at. Additionally, check with the Better Business Bureau to see how the Minnesota debt settlement company is rated. 

How to Make Your Debt Settlement Work 

To make sure you’re on the right path, there are some things to make sure you consider. If your settlement involves a monthly payment, make sure that it's not due at the same time as your mortgage or any other large expenses. Next, make sure that you’re putting money aside each month for emergencies. If an emergency comes up and you don’t have the funds, missing a payment on your debt settlement can be a disaster, causing the full balance to become due immediately. 

Alternatives to Debt Settlement 

Debt settlement is a good debt management strategy for certain people. In order for it to work, you will want to ensure that you are a good fit. If you aren’t, don’t worry there are other debt relief options available to you. Entering into a debt settlement program when you really aren’t a good fit is only a recipe for disaster and can put you into a much worse financial situation. Below is a brief explanation of other debt relief options that are also available, including debt consolidation, debt management plans and bankruptcy.