Debt settlement is a several step process. Read on to learn about what you can expect from debt settlement and to better determine whether it’s the best option for you at this time.
Written by Upsolve Team.
Updated August 1, 2023
If the Great Recession of 2008 taught Americans anything, it is that even the hardest-working, most dedicated and fiscally responsible people can fall on hard times through no fault of their own. It is therefore unsurprising that these days, Oklahomans from all walks of life are suffering due to financial challenges stemming from problems that simply couldn’t be helped. Jobs are lost, accidents happen, family members get sick and pass away.
Many Americans must go into debt just to make ends meet from time to time. Know that if you’re struggling financially, you’re not alone. And also know that thankfully, there are resources available to help you become financially stable and to reach your financial goals.
One solution that has helped many people is the debt settlement process. In an Oklahoma debt settlement, you make a large lump-sum payment to a creditor to settle your debt for less than the full amount due. After this process is complete, part of your debt is forgiven and your account is closed. You can either work with a debt settlement company or you can negotiate a debt settlement offer yourself.
If you use an Oklahoma debt settlement company, sometimes referred to as a debt relief company, to negotiate for you, you’ll likely be required to build a balance in an escrow account before the company will complete settlement offer negotiations with your creditors. The escrow account is an account that a third-party administrator controls. This administrator isn't connected to the debt settlement company. The money in this account is yours (and can be returned to you at your request) until the Oklahoma debt settlement company makes settlement payments.
Debt settlement companies often instruct their clients to stop making payments on the debts they’re attempting to settle. Not making payments to these creditors will lead to more collection activities such as collection calls and sometimes lawsuits, so it’s important to know what you’re getting into before you commit to this process.
Learn More Through Free Nonprofit Credit Counseling
If you are interested in eliminating your debt and gaining greater control over your financial situation, take advantage of a free credit counseling session with a nonprofit, accredited credit counseling agency. During your confidential consultation, your credit counselor will go over your bills, paycheck stubs, and bank account statements. Your counselor will assess your income, expenses, and debts. Together, you and your counselor will set financial goals and your counselor will recommend the best debt relief options for you based on your unique financial situation.
If you wanted to pursue a debt settlement, but this isn’t one of the options your counselor suggests, ask why. Usually, they will have a good reason for not recommending a particular option. You are under no obligation to follow the advice you’re given during a credit counseling session. But you should think carefully about the informed recommendations that you’re given at this time regardless.
How To Settle Your Debts in Oklahoma
Debt settlement is a multi-step process. Read on to learn about what you can expect from debt settlement and to better determine whether it’s the best option for you at this time.
- Collect the Details About Your Debts
- Collect Details About Your Ability to Settle Your Debts
- Learn About the Costs to Settle Your Debts in Oklahoma
- Decide Whether to Work With an Oklahoma Debt Settlement Company
- Research Oklahoma Debt Settlement Companies
- How to Make Your Debt Settlement Work
- Alternatives to Debt Settlement
Collect the Details About Your Debts
The first step to a successful debt settlement involves gathering your most recent account statements for each of your debts. Pay close attention to the interest rates, minimum payments, and outstanding balances on these bills. Break your bills into a pile for the secured debts and a pile of bills for unsecured debts. Unsecured debts are more suitable for a debt settlement. Creditors with secured debts usually want you to return collateral before they will settle with you. Although federal student loans are unsecured, they can’t be settled. However, some private student loans can be settled.
You’ll also need to get your free credit report from all three credit bureaus. When you're in default on a debt, a common tactic used by creditors is to sell the debt to a debt-buying firm or debt collector. These debt collectors will be your new creditor. You will negotiate with the debt-buying firm, not the original creditor, in the event that you want to settle a debt that has been sold to another company. Your credit reports will show if a debt-buying firm has bought one of your debts.
Collect Details About Your Ability to Settle Your Debts
If/when you’ve agreed to a payment plan to build your escrow balance with a Oklahoma debt settlement company or you’ve set up a short-term installment agreement directly with a creditor, know that staying on budget is critical to the success of your debt settlement plan. If you don’t correctly account for your income or your expenses, you’ll run the risk that you won’t be able to make one of your payments. And if you are late or miss even one payment, your settlement could fail and your full amount will again become due immediately.
When evaluating your income and expenses, take all of your upcoming circumstances into account. Are there unusual expenses popping up in the next 2-3 months that you need to account for? Will you be making more or less than usual in take home pay? Be as accurate as you possibly can to ultimately set up your settlement arrangement for success.
One of the worst decisions you can make in personal finance is to take money out of your retirement account for a debt settlement. In most cases, there will be severe tax consequences. The money you withdraw will result in taxable income unless it's from a Roth plan and you're over 59 1/2 years old. You will be paying income taxes on this money to the IRS. Even worse, you're paying creditors with money that they couldn't get in a lawsuit. Your retirement funds are exempt from creditors. The worst part of the problem is that you'll be using money that you need for living expenses after retirement. If you’re tempted to raid your retirement accounts for the purposes of debt settlement, talk to your credit counselor about debt management alternatives.
Learn About the Costs to Settle Your Debts in Oklahoma
There are a few costs that you’ll incur if you choose to settle your debts. You'll have late fees, other penalties, and higher interest rates accruing for as long as your debts remain unsettled and overdue. These fees won’t matter if you have a successful settlement, but if your creditor doesn’t agree to settle or your settlement falls through, they will matter a very great deal.
If you hire an Oklahoma debt settlement company, you'll also have their fees to pay along with expenses related to the escrow account. Just know that an Oklahoma debt settlement company can't charge you a fee for its service before they settle a debt for you. Along with the prohibition of upfront fees, the Federal Trade Commission (FTC) has many requirements for debt settlement companies. These FTC requirements include rules requiring the debt settlement company to disclose specific, important information to you.
Decide Whether to Work With an Oklahoma Debt Settlement Company
You don't have to hire an Oklahoma debt settlement company, as anyone can negotiate directly with their creditors. A “DIY” approach will save you a lot of money in the form of settlement company and escrow account fees. However, there are a few downsides to trying to do a debt settlement yourself. You don't have the insider knowledge about what kinds of offers your creditors will accept that a good debt settlement company would have. You also don't have the experience with debt settlement negotiations to know the "ins and outs" of the best way to achieve your objectives. Your limitations in these areas could lead you to offer much more money than might be necessary. Negotiating a debt settlement yourself could therefore, ultimately cost you much more than the fees from hiring a debt settlement company. Either approach is valid and has potential drawbacks and benefits. Choose whichever option makes the most sense for you.
Research Oklahoma Debt Settlement Companies
The first thing you’ll want to know about any Oklahoma debt settlement company you're thinking about hiring is how they calculate their fees. Then, make sure you know its terms and any conditions it has on its services.
Research any company that will be handling your money with the Better Business Bureau before entering into a relationship with that enterprise. Only hire a debt settlement company that has a good rating with the Better Business Bureau. You can also call the Oklahoma Attorney General's Consumer Protection Unit with any questions about a debt settlement company’s reputation or complaints filed against it. You can reach the Attorney General's consumer representatives at this phone number: (833) 681-1895. Another place to research any debt settlement company is the Consumer Financial Protection Bureau's Consumer Complaint Database. Just remember that even reputable companies will be flagged with some complaints. No company can please everyone. Warning signs to look out for are companies with a large number of complaints and complaints with the words “sham” or “scam” in multiple complaints. Also, pay particular attention to complaints from people in Oklahoma. The postal abbreviation for the state of origin is located in the upper right corner of the complaint.
How to Make Your Debt Settlement Work
If you’re building an escrow balance or making short-term installment payments (as opposed to selling property or surrendering an available lump sum), make sure there are no other large payments due around the time of the month that you have a payment due for your debt settlement plan. Keep a tight budget. Make sure you are setting aside money for expenses that occur less often than monthly. An example of such an expense would be oil changes for your car. Make extra payments into your account with an Oklahoma debt settlement company at times when you have more income than you need to meet your budget. An example of such a time might be when you receive your tax refund. Getting to the required balance in this account as soon as possible means that you'll be debt-free sooner.
Alternatives to Debt Settlement
Debt settlement is a helpful process for many people. However, for most people who are struggling with debt, there are better debt management and debt relief options available. Since debt consolidations and debt management plans pay your debts in full, these solutions don't have as much negative impact on your credit score as a debt settlement has. Many people are able to rebuild their credit quicker after bankruptcy than after a debt settlement. This is because bankruptcy will handle a wider range of debts than a settlement. A debt settlement is best only for certain unsecured debts and for consumers who have access to enough capital within a 2-3 month period to fund significant settlement offers.
Upsolve User Experiences2,231+ Members Online
Oklahoma Debt Consolidation
An Oklahoma debt consolidation uses a consolidation loan to combine your debts into one account. Instead of paying the monthly payments for many debts, you only have one debt payment to make after the consolidation. A consolidation will only work if your credit score is high enough to qualify for a favorable loan large enough to pay off the debts that you hope to restructure. Debt consolidation loans can be either personal loans, credit card balance transfers, or home equity lines of credit. If your credit score is mediocre or poor, consider a debt management plan instead.
Oklahoma Debt Management Plan
An Oklahoma debt management plan is a good option if your credit score isn't high enough for a favorable debt consolidation loan. A debt management plan is a type of debt consolidation that doesn’t involve securing a new line of credit. Instead of signing up for a new loan, a credit counseling agency negotiates a favorable repayment plan with each of your creditors. You then make one monthly payment to the credit counseling agency and the agency then pays each of your creditors. The payment you make to the credit counseling agency will be less than the combined minimum payments of your restructured debts. This option is available to everyone, regardless of credit score.
An Oklahoma bankruptcy is the ultimate debt solution. One persistent myth about bankruptcy is you "lose your stuff." The truth is that most people only lose one thing in bankruptcy: their debt. Another myth is that bankruptcy will destroy your credit. The truth is that most people have a better credit score within two years after filing bankruptcy than they did on the day before they filed. Until recently, bankruptcy was too expensive for many people. This isn't the case anymore. Upsolve provides a free tool that can help you file your own Chapter 7 bankruptcy in cases that don't require an attorney’s guidance.