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How to Settle Your Debts in Montana

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In a Nutshell

This guide will provide you with a solid overview of the debt settlement process. At the end, it will also explore some debt management alternatives, in the event that debt settlement isn’t a good fit for your situation.

Written by Upsolve Team
Updated March 19, 2020

Rugged individualism is the personification of Montana. However, it’s important to remember that even rugged individuals need help from time to time. There’s not only no shame in seeking assistance when times get tough, doing so can make individuals better equipped to help their neighbors when they fall on hard times too. If you’re struggling financially and are getting behind on your bills, know that there are resources and solutions available to you. For example, you may benefit from working with a debt settlement company to propose a debt settlement offer to one or more of your creditors. The Montana debt settlement process unfolds like this: you pay a large lump-sum payments to your creditors and they, in turn, partially forgive the debt you owe them. As a result, you are able to settle your debts for less than the full amount due. You can pursue a debt settlement yourself or you can hire a Montana debt settlement company to negotiate with your creditors so that you don’t have to. Using a debt settlement company, sometimes called a debt-relief company, can take the stress of managing debt negotiations with several different creditors off your shoulders. However, it’s important to know that all creditors will work with debt settlement companies. Sometimes, a creditor will only negotiate with account holders.

One major risk of attempting a debt settlement is at least one of your creditors could get aggressive. The creditor could sue you and get a judgment. With the judgment, they could garnish your wages. Having your income cut by one creditor can make it difficult to settle with other creditors. Sometimes when one creditor sues a consumer, other creditors see this on the trial courts' public databases. This leads to other creditors suing you to keep their place in the priority of creditors trying to collect from you. For these reasons, it's best to try to get settlement negotiations completed  in a timely fashion. If debt settlement is a process that interests you, don’t wait to explore your options and get the process rolling. 

Learn More Through Free Nonprofit Credit Counseling

Credit counseling is the best place for you to start the process of evaluating your options and making an informed decision about the best path forward. A nonprofit, accredited credit counseling agency has no economic incentive to sell you its services. These agencies do have some services that they charge for, but credit counseling is always free. During your credit counseling session, your credit counselor will evaluate your income, debts, and general financial picture. They will then provide you with personalized recommendations and an action plan designed to help you meet your short-term and long-term financial goals. There is no risk to taking this meeting, it is provided free of charge, and this service is available to everyone. 

Make sure the credit counseling agency that you use is a member of the National Foundation for Credit Counseling (NFCC). The NFCC makes sure that all its members meet strict requirements. Knowing the credit counseling agency has met these requirements helps you to know you're dealing with a reputable firm.

How to Settle Your Debts in Montana

This guide will provide you with a solid overview of the debt settlement process. At the end, it will also explore some debt management alternatives, in the event that debt settlement isn’t a good fit for your situation.

Collect the Details About Your Debts

To set up a successful debt settlement program, you’ll need to take a close look at the most recent statements for your credit card debts and other debts. Look at the interest rates, minimum payments, and outstanding balance on each of these bills. Break these bills into secured debts and unsecured debts. From the unsecured debts, separate the student loans. Break any of these loans into private loans and federal student loans. Federal loans can’t be settled, but they can be managed in other ways. However, some private student loans, like many other kinds of unsecured debts, can be settled. Settlement is not a good option for secured debt, which is one of the many reasons why you need to carefully analyze your debts before determining which you’d like to settle and which you’d like to manage in alternative ways.

When analyzing your debt, make sure to obtain your free credit report from all three credit bureaus. You may find debts on these reports that you've forgotten. You may also find that some of your debts are now held by collections agencies. When negotiating your debt settlement, you'll need to negotiate with these debt buyers instead of your original creditors. If you find any errors on your credit reports, be sure to correct the errors. This effort may increase your credit score.

Collect Details About Your Ability to Settle Your Debts

If you’re building a balance with a debt settlement company or making installment payments directly to your creditor(s), and you don’t have a lump sum of money already available and you’re not selling assets to fund your offers, you’ll need to stick to a budget when navigating the debt settlement process. It’s important to set up a good budget to make sure you always have the money available for these payments, as failure to make even one payment on time could sink your debt settlement agreements and leave you in a worse financial position than you were in when you started. 

The worst personal finance mistake you can make is to make withdrawals from your retirement plan to pay for debt settlements. If you’re struggling to make your budget work, explore debt management alternatives - DON’T pull from your retirement accounts to fund settlements. When using retirement money to settle debts, the tax consequences are severe in that you pay the tax penalty, the income tax on the money withdrawn, and the discharge of indebtedness income. If a Montana debt settlement company recommends that you use your retirement savings to settle debts, you may want to file a complaint with the Montana Office of Consumer Protection.

Finally, note that if you're successful in settling any case, the IRS will make you pay income taxes on the difference between the amount due and the amount you settled for. Even though you haven't received any money, this discharge of debt is taxable income. 

Learn About the Costs to Settle Your Debts in Montana

If you choose to work with a Montana debt settlement company, you will incur more costs than you would if you negotiated with your creditors directly. First, you will incur the fees that the debt settlement company charges. Montana debt settlement companies charge their fees based on a percentage. While this can be a percentage of the total amount of debt, it’s usually a percentage of the total amount the debt settlement company saved for you. It’s best to use a firm that charges their fee based on how much money they save for you because it gives the company an incentive to get you a great deal. 

Also, because debt settlement companies aren't allowed to hold your money, a third-party administrator that doesn't work for the debt settlement company will hold your money in a special account. This account is sometimes called an escrow account. You will incur administrative fees and bank charges associated with that account. 

Decide Whether to Work With a Montana Debt Settlement Company

You can settle your debts without using a Montana debt settlement company. If you do the settlement negotiations yourself, you’ll save the money you would have paid in fees for the debt settlement company and bank account administrator. If you decide to do the make settlement offers yourself, make sure to get written settlement agreements before sending any money. 

It should also be noted however, that there are disadvantages to negotiating a settlement yourself. If you’re like most people, negotiating with creditors isn’t something you do every day. A debt settlement company has done this many times. You won't have the insider knowledge about what kinds of offers the creditors will accept. The debt settlement company usually will have this insider knowledge. When you need help, your only place to turn for information is likely going to be the Internet. It will be difficult to know if the information you're getting is correct. Also, debt negotiation is stressful and time intensive. Letting someone else “do the heavy lifting” can be worth the fees a settlement company charges you. 

Research Montana Debt Settlement Companies

Make sure that you understand a Montana debt settlement company's prices and their terms of service before you agree to work with them. By law, the company must explain how it calculates its fees and what its conditions of service are. If a debt settlement company asks you to stop making monthly payments on your debts to enhance your negotiating position, they must explain the negative consequences of not paying your debts. These consequences include damage to your credit report, collections calls, and potential lawsuits by your creditors. They must also tell you about expenses (including late fees and higher interest rates on other accounts) that you may incur as a result of your default. When you put funds into an escrow account, the debt settlement company must tell you that all these funds are yours and that you're entitled to the interest earned in the escrow account. The creditor can only take money from the escrow account after settling with a creditor.

If you're considering hiring a business to handle your finances, make sure to check the Better Business Bureau's rating of the business first. Since some debt settlement firms are scams, it's important to check the company’s reputation with the Montana Department of Justice - Office of Consumer Protection's Complaint Database. Montana has one of the best such services in the country. To get more information than is provided in the complaint database, call the Office of Consumer Protection at one of these phone numbers: (406) 444-4500 or toll-free at (800) 481-6896.

How to Make Your Debt Settlement Work

If you’ve agreed to a payment plan arrangement with a Montana debt settlement company or you’re making short-term installments directly to a creditor, know that staying on budget is one of the most important parts of the debt settlement process. Failing to make even a single payment on time could cause this process to fail and you could ultimately be left in a worse financial position than when you began negotiations.

When setting up this monthly budget, make sure you provide for expenses that happen less often than monthly. Such expenses would include annual insurance payments or routine car maintenance expenses that may need attention during your debt settlement period. Also, make sure to set aside some money in your savings account for emergency expenses. Not having money set aside for these expenses can blow your budget and cause you to become unable to make your debt settlement payments on time. Create a workable budget and stick to it. 

Alternatives to Debt Settlement

Since debt settlements have one of the most negative impacts on your credit score of all debt management solutions available to you, it's unlikely that your credit counselor will recommend that you pursue debt settlement unless your situation is ideal for this option. In most cases, your credit counselor will recommend that you consider securing a debt consolidation loan or entering into a debt management plan. Both options streamline your debt (ideally) with more favorable terms than you’re paying now. In some cases, a credit counselor is more likely to recommend a bankruptcy than these alternatives. 

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Montana Debt Consolidation

Montana debt consolidation loans allow you to pay your existing debts through a single new line of credit. This leaves you with only one loan payment to make monthly on your consolidated accounts instead of numerous payments for different creditors. Consolidation loans are a good option if your credit score is high enough for you to qualify for a loan large enough to cover the bills you want to combine. Also, if you can’t secure a loan with terms that are more favorable than those you’re paying now, this won’t be a great option for you. 

Montana Debt Management Plan

If your credit score isn't high enough to qualify for a low-interest debt consolidation loan, a Montana debt management plan might be your best option. These plans function as debt consolidations except they don't use a loan to combine your debt. In a debt management plan, a credit counseling agency works as a “middle man” between you and your creditors. The credit counseling agency negotiates a favorable repayment plan on your behalf. You then make one monthly payment to the credit counseling agency and they pay your numerous creditors on your behalf. 

Montana Bankruptcy

If these other debt-relief options won't work for you because you earn too little to make regular consolidation payments or your debts are simply overwhelming, a Montana bankruptcy is an excellent option. It's always a good idea to take advantage of a free consultation with a qualified bankruptcy attorney if you’re interested in exploring this option. Knowing your bankruptcy rights can allow you to make an informed decision concerning which debt solution is best for you. One of the disadvantages of bankruptcy is the high costs of filing. Thankfully, Upsolve provides a free tool that allows you to file your own Chapter 7 bankruptcy in cases that don't require an attorney’s assistace. 

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