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How to Settle Your Debts in North Carolina

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In a Nutshell

If you are interested in learning more about pursuing debt settlement, whether on your own or through a North Carolina debt settlement company, the next step is to conduct research and gather the information necessary to create an effective plan. Read on about the pros and cons about self-directed settlement, how to choose a reputable debt settlement company, and how to better ensure a successful debt settlement process. 

Written by Upsolve Team
Updated May 21, 2020

Having debt that you cannot afford to pay can affect more than just your wallet and your credit report. Financial problems often take a toll on the entire family, and may even harm your health and overall well-being. Fortunately, it doesn’t have to be this way. Multiple debt relief options exist for individuals who have fallen behind on monthly payments, or are otherwise struggling to pay their debts. 

Due to the stigma surrounding financial challenges, and the number of scams out there to “help you get out of debt fast,” many people are hesitant to take advantage of the debt relief options available to them. When individuals are courageous enough to reach out for help, they are at risk of falling prey to shady business practices that put profits before the people they are supposedly trying to help. Thankfully, there are ways to approach the idea of making your debt more manageable in informed, safe ways. 

It’s important to evaluate all of the options available to you so that you can make the best possible choice for you and your family in consideration of your unique circumstances. Below, you’ll learn about how free credit counseling can help you make this informed determination. One of the debt management options that your credit counselor may suggest involves pursuing a debt settlement program. This guide will give you both an introduction to this particular option and information regarding how to determine if this is the best solution for your unique needs. At the end of the guide, you’ll also find information on alternatives to the debt settlement process, in case a different option is more suited to your situation and goals. 

With a successful debt settlement, you’ll be able to close your debt-related accounts after paying much less than what you actually owe your creditors. You can choose to work with a  North Carolina debt settlement company or enter into debt negotiation with creditors entirely on your own. To determine which method is best for you, read on.  

Your ability to effectively utilize debt settlement depends on the types of debt and amount of debt you have, as well as your ability to make significant settlement offers to your creditors either immediately or in the very near future. Unsecured debts are generally the only type of debt you should address via settlement. This is because secured debts, such as car loans, have collateral that can be repossessed by the creditor if you don’t agree to pay your debt in full, so secured creditors don’t have much incentive to enter into debt settlement agreements. 

Furthermore, if you have enough money or assets to pay the total amount owed, a settlement plan is probably not your best option. Not only are creditors unlikely to negotiate a settlement with you if you have the means to pay them in-full, the debt settlement process will negatively affect your credit score. If you can avoid a worsening of your credit score, you probably should. For debt settlement to be a good idea. you should have enough money to pay the agreed-upon settlement amount, but not enough to pay the full debt owed. This is true whether you work with a New Jersey debt settlement company or choose to settle debts on your own. 

Learn More Through Free Nonprofit Credit Counseling 

Accredited, nonprofit credit counseling agencies provide an invaluable service to potential customers, at absolutely no cost. If you’re interested in learning about whether debt settlement (or any other debt management option) is right for you, consider scheduling a free credit counseling session with an accredited nonprofit credit counseling agency in your area. 

Credit counseling agencies offer free credit counseling to anyone interested in this service. It’s a good idea to take advantage of this no-cost opportunity before moving forward with any type of debt relief program because doing so will help you make informed decisions about your financial options.

During your session, a trained credit counselor will perform a thorough analysis of your personal finances, including bank accounts, income, monthly expenses, debts, and short and long-term goals to help you devise an action plan for improving your financial situation. They will advise you on which of the many debt relief options is best suited to your unique needs, and you will leave with a better understanding of what steps you need to take to get your financial life back on track. Even better, there is absolutely no obligation to follow their advice if you don’t want to. Although the guidance you will receive will be solid (as long as you work with an accredited, nonprofit credit counseling agency) the decision to follow your credit counselor’s advice or to ignore it is always up to you. 

How to Settle Your Debts in North Carolina

If you are interested in learning more about pursuing debt settlement, whether on your own or through a North Carolina debt settlement company, the next step is to conduct research and gather the information necessary to create an effective plan. Read on about the pros and cons about self-directed settlement, how to choose a reputable debt settlement company, and how to better ensure a successful debt settlement process.

Collect the Details About Your Debts 

In order to better ensure that your debt settlement plan is ultimately successful, it’s necessary to gather certain information before you begin. If you decide to take advantage of a free credit counseling session, your counselor will provide advice and recommendations based on this information. As such, the more details you provide, the better equipped your counselor will be to provide appropriate recommendations personalized for your situation. 

Important documents to gather include bank, loan, and credit card statements as these will outline monthly payments and interest rates, outstanding balances, secured v. unsecured debt designations, and other relevant details about your accounts. You should also request a free copy of your credit report, which will provide creditor contact information and details about all of the debts that you owe that have been reported to the three major credit bureaus. In the event that any of your debts have been sold to collectors, you’ll be able to learn about who has purchased your debt. You’ll need to deal with these debt collectors during negotiations as they now “own” your debt.

Collect Details About Your Ability to Settle Your Debts

To determine whether debt settlement may be a viable option for you, begin by collecting information about your monthly income, expenses, and debts. Calculating your income and expenses will be important if you don’t have immediate access to enough money (or property to sell) to fund your settlement offers. By looking at your monthly budget, you’ll be able to tell whether you have enough disposable income left over after you’ve covered your expenses to make monthly installment payments until you can fund settlement offers after 2 or 3 installments have either been set aside or placed in an escrow account by a debt settlement company. Some creditors will accept 2-3 installment payments directly, but most prefer a single lump sum settlement offer because that approach decreases the likelihood of further default. 

Once you have figured out your monthly income, you’ll need to determine your monthly expenses, both fixed and variable. Fixed expenses are those that change very little, or not at all, from month to month. These include car payments, rent or mortgage, and health insurance. Variable expenses can vary widely from month to month. These include expenses for entertainment, groceries, and gas. 

If you subtract the full amount of your monthly expenses from your income, what you have left is referred to as disposable income. This is the amount that can be designated for debt settlement payments, or an upfront, lump sum payment. If your disposable income is extremely low, or non-existent, debt settlement may not be a good fit for you. In this case, Chapter 7 bankruptcy might be your best option. If, however, there is enough left to settle your debts within a two to three-month period, debt settlement may work. Alternatively, if you have some disposable income left over but not enough to fund settlement offers, you may want to ask your credit counselor about entering into a debt management plan. 

Keep in mind that credit cards with small balances should not be included in a debt settlement plan, as it is usually more cost effective to pay them off separately. And retirement funds should never be used to settle debts. For starters, you will likely incur IRS tax consequences, such as hefty fees and penalties for early withdrawals. Even worse, you can seriously jeopardize your financial future by draining your retirement accounts before retirement age.

Learn About the Costs to Settle Your Debts in North Carolina 

Just as there are costs involved with falling behind on debt payments, there are costs to settle them. If you choose to work with a North Carolina debt settlement company, you will need to pay fees. These are usually charged in one of two ways—a percentage of your total debt amount or total savings. The latter option is preferable, as it gives the debt settlement company a significant incentive to get you a great deal.  

Keep in mind that the longer it takes you (or a debt settlement company) to resolve your overdue debts, the more fees and penalties will accrue. Creditors generally won’t agree to settle accounts that are fewer than 90 days past due, so in this way, debt settlement comes with costs no matter how you approach the process. 

Decide Whether to Work with a North Carolina Debt Settlement Company

You can settle debts on your own, which will save you a significant amount of money in debt settlement company fees. However, this DIY method is not a good idea for everyone. In some cases, you may simply be uncomfortable negotiating with creditors on your own. In other cases, you may have too little time and too many alternative responsibilities to make self-directed debt settlement a navigable process. Pursuing this process on your own takes a great deal of time, effort, and organization. 

But for some people, going it alone is the absolute best route. For starters, certain creditors won’t agree to work with a debt settlement company. For these creditors, self-directed settlement may be your only option. The other benefits to doing it yourself include being able to remain in control the entire time, and cost savings. 

On the other hand, working with a New Jersey debt settlement company means you will no longer have to deal with creditors, and you have a better chance of the lowest settlement possible, as debt settlement companies are skilled at negotiating low amounts. As a result, there is no one “right” way to approach debt settlement. Choose whichever approach makes the most sense for your unique circumstances. 

Research North Carolina Debt Settlement Companies

If you don’t want to take a DIY approach, don’t choose to work with the first North Carolina debt settlement company you find via a Google search as a matter of course. Do your homework. Although there are a plethora of reputable companies available for you to work with, there are also plenty that engage in bad business practices, and some are outright scams. To determine if the company you are considering is legit, visit the North Carolina Attorney General’s website and the Better Business Bureau website to see if any complaints have been filed against that enterprise. You may also want to ask your credit counselor if they are aware of any trustworthy debt settlement companies operating in your area. 

How to Make Your Debt Settlement Work

If you decide to go pursue debt settlement, improve your chances of successfully completing your program by considering the following tips:

  • Work with a credit counselor to determine whether your situation is a good candidate for debt settlement. 

  • Choose a monthly payment or lump settlement that you can afford. 

  • Choose a due date that works for you. Avoid having debt settlement payments coincide with rent or mortgage payments, for example. 

  • Stick to your scheduled payment date, and make extra payments whenever possible. 

  • Close out other credit cards. Leaving cards with zero or low balances open can negatively impact your ability to get settlement offers. 

Alternatives to Debt Settlement

Deciding that debt settlement is not right for you does not mean that you have run out of options. There are multiple alternatives to debt settlement available, each with its own set of advantages and disadvantages. The information below will introduce you to these other forms of debt relief, and help you determine whether they might be a good fit for your unique situation. Even after you have reviewed this information, it is in your best interest to meet with a credit counselor who can help to ensure that you’re choosing the best debt management solution for you.

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North Carolina Debt Consolidation

Debt consolidation loans are loans that require good credit and sufficient income to show the ability to repay. If you are struggling to pay your debt but have not yet fallen behind in payments, this form of debt relief may be a viable option. A North Carolina debt consolidation loan allows you to combine the debts of several accounts into a single account. In addition to only paying one loan each month, you will also enjoy an overall cost savings if you can secure a new loan with favorable terms. 

North Carolina Debt Management Plan

The same credit counseling agencies that provide free credit counseling offer debt management plans. DMPs are not loans, as credit counseling agencies are not banks. As such, entering into a DMP doesn’t require you to have good credit. For people who wish to pay off their debts but for whom current monthly payments are prohibitively high, a debt management plan allows for a lower monthly payment than the one set by creditors. Instead of paying multiple creditors each month, you’ll submit one easy payment to the agency, which will then distribute that payment to your creditors per the terms of your plan. 

North Carolina Bankruptcy

If after reviewing all of the information above and meeting with a credit counselor you have determined that Chapter 7 bankruptcy is the best option for you, Upsolve can help. We are a non-profit organization that helps low-income individuals who wish to file for North Carolina bankruptcy but cannot afford legal counsel. If you are considering this type of debt relief, visit our website today for information about North Carolina bankruptcy, help finding an attorney, and resources designed to help you file on your own for free, should that option interest you. 

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