How to Settle Your Debts in New Hampshire

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Written by Upsolve Team.  
Updated February 24, 2020

Summary

In this article, we will give you tools to help determine if debt settlement could be right for you. We will then walk you through the debt settlement process, step by step, so that you know what to expect and how to move forward with the least risk and the best chance for success. 

New Hampshire may have the lowest poverty rate in the country, but that’s no comfort if you’re struggling to stay on top of your bills. The most important thing to know when you’re trying to manage your personal finances is that there's no single “best” solution. Instead, you’ll want to concentrate on finding the debt management and relief solutions that are best for your current financial circumstances. In this article, we will explore the option of pursuing debt settlement in detail. As you’re learning about this process, simply keep in mind that it may be a good fit for your situation, but if it’s not, there are alternative debt management and relief solutions available. 

Debt settlement is a process that allows you to enter into an agreement with your creditors to pay less than your total debt to satisfy your outstanding balance. In exchange for a lump sum of money (that reflects a significant fraction of your balance), your creditor grants you partial debt forgiveness so that you can close out your account and any risk of collections efforts will cease.

Debt settlement works best with unsecured debts, like credit card debt, signature loans or deficiency balances following a repossession. This process is rarely effective for most other debts, like payday loans, title loans, student loans (and never for federal student loans) and secured debt, as secured creditors generally prefer to exercise their right of repossession in the event of a payment default. No creditor is required to agree to a settlement plan. Debt settlements may be a good option for you if your debts are mostly or all unsecured, you're already behind in your payments, and you have access to money to fund lump sum offers or the ability to set money aside to save up for them within a month or two. 

It’s important to understand the risks associated with debt settlement before committing to this process. It can impact your credit score negatively. Additionally, there can be tax consequences. Depending on how much of a debt is forgiven, the IRS may treat that amount as taxable income when it comes time to file your income taxes. Finally, even though there are many reputable New Hampshire debt settlement companies to assist you if you don't want to manage the debt negotiation process on your own, there are also a lot of predatory companies only interested in profit that will try to take advantage of you. It’s therefore important to be as informed as possible before moving forward with the debt settlement process. 

Learn more through free nonprofit credit counseling

The best first step you can take as you explore various debt relief options and debt management is to seek credit counseling. Credit counseling will give you an opportunity to meet with a certified credit counselor one-on-one to go over your financial circumstances. This single-session opportunity is free and is offered to anyone interested in scheduling an appointment with an accredited, nonprofit credit counseling agency. Your credit counselor will take an in-depth look at your income, expenses, and debts, and speak with you about both your short-term and long-term financial goals. At the end of the session, they'll provide you with a personalized action plan to help you reach these goals. While credit counseling agencies don't assist with debt settlements, you can always ask your creditor counselor if they believe you would be a good candidate for this process.

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How to Settle Your Debts in New Hampshire

In this article, we will give you tools to help determine if debt settlement could be right for you. We will then walk you through the debt settlement process, step by step, so that you know what to expect and how to move forward with the least risk and the best chance for success. 


Collect the Details About Your Debts 

The first thing that you'll need to do to accurately determine whether debt settlement may be right for you is to gather details about each of your debts. This will include the amount of debt, your current interest rates, and minimum payments. Usually, you can find all of this information in your most recent statements from credit card companies and other creditors. You’ll want to find the information for all of your debts, including those you don't expect to settle, like secured debts and student loans, so that you can give your credit counselor and your creditors a complete financial picture. It’s also a good idea at this point to get a free copy of your credit report. It’s not at all unusual for creditors to assign or sell delinquent accounts to collection agencies or other debt collectors, often more than once. Having your credit report on hand makes it easy to approach the current holder of your debt when you're making your settlement offers. 

Collect Details About Your Ability to Settle Your Debts

Next, and equally important, you’ll need to collect details about your ability to afford settling your debts. You’ll need to determine what your monthly income (take-home pay and any other money that you receive regularly) looks like for an average month. If your only income is from Social Security, please note that this income is protected from creditors. If you're working, you should look at your most recent paycheck stubs, although make sure that these documents represent “typical” work weeks. If you’ve had a lot of overtime lately, you don’t want to base a potential payment plan on an artificially inflated income that you can’t sustain. 

When evaluating your budget, you should include any regular monthly expenses and an average amount for variable expenses like groceries. The amount of money that you have left at the end of the month after accounting for your budget items is the amount that you can set aside to save for settlement offers. If your living expenses exceed your income then Chapter 7 bankruptcy may be a better option for you to get out of debt. You should never raid any retirement accounts to cover your lump sum offers. There are penalties and tax consequences for early withdrawal and you risk not having enough in your accounts for when you do retire. 

Learn About the Costs to Settle Your Debts in New Hampshire 

Any time you enter into debt settlements, you incur costs. Even if you don't work with a New Hampshire debt settlement company, you’ll incur late fees and other penalties for late or non-payment before you can qualify for debt settlement, as creditors won’t accept debt settlement offers from someone whose account is current. If you do choose to hire a New Hampshire debt settlement company, you’ll also incur fees for their service, and if they require an escrow account to build up your savings, you’ll be responsible for any fees associated with that bank account. The service fees are usually based on a percentage, which on the expensive side could be a percentage of your total debt. It's better to go with a New Hampshire debt settlement company that charges you a percentage of your total savings, as that's cheaper for you and incentivizes the company to negotiate favorable debt settlement terms on your behalf. A reputable New Hampshire debt settlement company will collect their fees over time, charging you a portion of their fees as each debt is settled. If a debt settlement company tries to collect their fees before they complete any settlement agreements, treat that as a huge red flag and don’t sign up for their services.

Decide Whether to Work with a New Hampshire Debt Settlement Company

Working with a reputable New Hampshire debt settlement company can be very helpful during the debt settlement process. With their insider knowledge and established creditor relationships, reputable companies can fairly accurately predict what lump sum amounts will be accepted as settlements. That being said, you don't need to work with any debt settlement company if you don’t want to. Anyone can move forward on their own, although a DIY approach is probably most likely to be successful if you're organized, computer savvy, not afraid to negotiate and able to keep track of all the facts and figures involved. This approach has benefits beyond saving the money you’d otherwise have to pay in service fees to a debt settlement company. Moving forward on your own allows you to be in complete control of the process, and gives you an opportunity to settle with creditors who have a policy of not working with any New Hampshire debt settlement companies. Keep in mind, however, that this process can easily get overwhelming when you’re trying to navigate it on top of your regular obligations. Both approaches have benefits and drawbacks, so make sure to do whatever makes the most sense for your situation. 

Research New Hampshire Debt Settlement Companies

For all the good reasons why you may want to hire a New Hampshire debt settlement company, it can also be nerve-wracking to know that there are many scams out there. You’ll want to do some research before committing to working with any particular company so that you can ultimately feel confident about your choice. First, know that any reputable New Hampshire debt settlement company must share with you, before you sign up, information about their program. This will include the price and terms, estimates for the timing of results and amount required to fund settlement offers, as well as possible negative consequences you may face if their program involves stopping payments to your creditors. 

There are also several red flags that you can look out for to avoid scams and predatory companies. If a New Hampshire debt settlement company offers guarantees for results, that's a red flag. Remember, no creditor is obligated to agree to debt settlements. Additionally, if they are hyping a “new government program” that can be suspicious. It can also be a red flag if the New Hampshire debt settlement company advises you to stop making payments and stop communicating with creditors before you have an actual plan in place. And if any debt settlement company tries to charge their fees before any settlements are accepted, you should look elsewhere. 

You can check out the New Hampshire attorney general’s office (and particularly its consumer protection bureau) to see whether there have been complaints filed against a company you're considering or potential scams going on in your area. You can also check with the Better Business Bureau to see if there is a history of complaints against the company you’re researching and to check a New Hampshire debt settlement company’s overall rating. 

How to Make Your Debt Settlement Work

Consider following some best practices to help make your debt settlement as successful as it can be. If your debt settlement process involves a payment plan, make certain that your monthly payment date is not set to the same date as any other large monthly payments (i.e. avoiding the first of the month). You should also build in an emergency fund, where you're setting aside some money each month in case something unexpected comes up. You can always contribute extra money into your savings if you come into a lump sum like an income tax refund, but make certain that you first replenish or build up your emergency fund first. Why does budgeting and building an emergency fund matter to the debt settlement process? If you’re paying in installments, you’ll want to make sure you have enough income available to cover each payment. Additionally, successful debt settlement helps place you on the road to becoming debt free. Failing to think ahead now will likely land you in financial crisis again in the future. 

Alternatives to Debt Settlement

If you find that debt settlement is not the best debt management system for you, be sure to check out some other alternatives to help you reach your financial goals. Consider this short overview of some of the most common alternatives to debt settlements, including debt consolidation, debt management plans, and filing for bankruptcy.

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New Hampshire Debt Consolidation

Securing a debt consolidation loan can be a good debt management path, under the right circumstances. After securing a New Hampshire debt consolidation loan, you’ll use that loan as a balance transfer to pay off your existing debts. This will streamline your bills into one account, to be paid monthly. If you have a good or excellent credit score and can qualify for a lower interest rate on your debt consolidation loan, you'll save over time by paying off your debts with higher interest rates at the lower consolidation loan rate. Securing a debt consolidation loan is likely not an option for you if your credit score is poor. 

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New Hampshire Debt Management Plan

A debt management plan is a form of debt consolidation that's not dependent on your credit score. In a New Hampshire debt management plan (or “DMP”) you can work with a credit counseling agency to create a reasonable payment plan for your consolidated debt. The credit counseling agency will negotiate on your behalf with your creditors to (ideally) lower your current interest rates and reduce or eliminate late fees and penalties. Instead of paying multiple creditors each month, you’ll instead pay the agency a lump sum. The agency will then distribute these funds to the creditors in your plan. 

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New Hampshire Bankruptcy

If your monthly expenses exceed your monthly income, bankruptcy is likely a good option for your situation. After a successful New Hampshire bankruptcy, you can walk away from some, or all, of your unsecured debts. If you decide to move forward with a New Hampshire bankruptcy and can’t afford an attorney, you can try out Upsolve’s screening tool to see if you qualify for free assistance every step of the way through this process.

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