How To Settle Your Debts in South Carolina
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This guide will walk you through the steps you’ll need to take to achieve a successful debt settlement program. If a debt settlement plan doesn’t look like a good fit for you, consider the other debt solutions and money management options mentioned at the end of the guide.
Written by Upsolve Team.
Updated January 5, 2022
Most people will take on debt at some point during their lives. If you’re behind on your bills and trying to figure out the best way to catch up, you’re certainly not alone. One option that may be worth exploring is the debt settlement process. In a South Carolina debt settlement, you make a deal with your creditor(s) to clear your debt for less than the full amount due. Essentially, you offer them a significant lump sum in exchange for partial debt forgiveness and the ultimate closure of your account balance. Y
You can negotiate for yourself, or you can hire a South Carolina debt settlement company to negotiate for you. Note that since you aren’t paying the full outstanding balance due, a debt settlement will harm your credit score at first. But, by eliminating your debts, this process will allow you to rebuild your credit over time.
A settlement offer is usually paid in one lump-sum payment. If you choose to work with a South Carolina debt settlement company, they will likely have you make a few payments into an account that’s managed by a third party before turning over a lump-sum payment to your creditor(s).
The Federal Trade Commission (FTC) requires that debt settlement companies use escrow accounts rather than having clients simply fund settlement amounts by paying the companies directly. The FTC created this rule because some debt settlement companies have operated as scams that took their clients’ money without providing any benefit for those clients.
If you negotiate your own settlement agreements, know that most creditors will only accept a single lump-sum payment offer. However, sometimes creditors will accept short-term installment agreements to settle the debt. These installment agreements will be for only a few months and will be for much larger payments than your normal minimum balance due. The creditors aren’t willing to use a long-term payment plan because you have already failed with the normal long-term plan and they want to mitigate the risk of outright default.
Learn More Through Free Nonprofit Credit Counseling
It's a good idea for anyone interested in debt management to schedule a free credit counseling session with a nonprofit credit counseling agency that is a member of the National Foundation for Credit Counseling (NFCC). NFCC members must follow strict standards. By meeting these standards, NFCC members ensure a high level of service for you.
During your initial free credit counseling session, your credit counselor will look at your bills, paycheck stubs, and bank account statements to assess your debts, income, and expenses. Together with your credit counselor, you'll set goals for your financial future. Your credit counselor will then create a personalized action plan for money management and debt solutions custom-tailored to your situation. This service is free of charge and available to anyone.
Many credit counseling agencies provide other services such as bankruptcy counseling and foreclosure counseling. While credit counseling is always free, nonprofit credit counseling agencies do generally charge for these other services. This arrangement is necessary so the credit counseling agency can pay its staff. If you’re interested in any of the other service that your agency provides, ask your credit counselor for more details.
How To Settle Your Debts in South Carolina
This guide will walk you through the steps you’ll need to take to achieve a successful debt settlement program. If a debt settlement plan doesn’t look like a good fit for you, consider the other debt solutions and money management options mentioned at the end of the guide.
- Collect the Details About Your Debts
- Collect Details About Your Ability to Settle Your Debts
- Learn About the Costs to Settle Your Debts in South Carolina
- Decide Whether to Work With a South Carolina Debt Settlement Company
- Research South Carolina Debt Settlement Companies
- How to Make Your Debt Settlement Work
- Alternatives to Debt Settlement
Collect the Details About Your Debts
Unsecured debts such as credit card debts, medical bills that have been sent to collection agencies, and private student loans are types of debt that are good choices for debt settlements. While federal student loans are "unsecured debts," there are special debt-relief options that are better for these loans, as the government generally won’t settle them. Secured debts such as your mortgage or car loans aren’t good choices for debt settlements. Secured creditors will want you to return the collateral before settling with you. Most people don't want to lose a house or car.
Getting a free copy of your credit report from all three credit bureaus is important before you determine which debts to settle and which debts to manage in an alternative way. Debts in default are often bought by debt-buying firms. These debt collector firms are who you would negotiate with, should you decide to settle any debts that are in collections status. It’s generally just a good idea to gather all the information you can about all of your debts, including the total amount due and interest rates associated with each one, before moving forward with the debt settlement process.
Collect Details About Your Ability to Settle Your Debts
People often make settlement offers out of the sale of some of their possessions, inheritances, lawsuit settlements, or other means of gaining large amounts of cash. For these folks, creating a budget (while a good idea generally) isn’t very important for the purposes of debt settlement. However, if you’re planning on making short-term installment payments to your creditor(s) directly or you need to build up an escrow balance for a South Carolina debt settlement company, budgeting is essential to a successful debt settlement program.
The first step in creating a budget involves assessing your income. For most people, paycheck frequency and amount is the most important part of determining monthly income. If you don't get the frequency right, your calculation will be off and your budget could fail. If you get paid once every two weeks, you aren’t paid twice per month since you will receive three paychecks in some months. To calculate bi-weekly paychecks as monthly income, you would multiply 26 bi-weekly periods by the average paycheck amount, and then divide it by the 12 months in a year. This will give you the total amount for a month. For weekly paychecks, the calculation would be 52 weekly periods times the average paycheck divided by 12 months. If you get paid on particular dates every month, such as the first day of the month and the 15th day of the month, you're paid semi-monthly. The semi-monthly conversion calculation will be 24 pay periods times the average paycheck amount divided by 12 months.
However you need to calculate your income, make sure you’re only taking into account the income you’ll receive in the next few months. If you plan to do seasonal work six months down the road, that isn’t going to help your debt settlement efforts now.
Learn About the Costs to Settle Your Debts in South Carolina
If you choose to work with a South Carolina debt settlement company, you’ll need to know what your fees will be and when they’ll be charged. A debt settlement company can only take the portion of its full fee related to the debt it has settled when the debt settles. That is, each time the company settles with one of your creditors, it's entitled to take its fee from you. It may not charge you this fee upfront, so if a company is asking you to pay in advance, find an alternative company to work with.
If the debt settlement company is charging you a contingency fee for your settlements, it must tell you the percentage and the estimated dollar amount upfront before they begin to represent you. A contingency fee is a fee that's based upon how much money the South Carolina debt settlement company saves for you.
Also keep in mind that the longer it takes to resolve your debt settlements, the more fees and penalties will accrue. These pile up fast, so if debt settlement is a good option for you, work quickly to get this process completed as soon as you can.
Decide Whether to Work With a South Carolina Debt Settlement Company
You don't have to hire a debt settlement company to benefit from a debt settlement process. Debt settlements are negotiations you can complete yourself. The disadvantage of engaging in the debt settlement process yourself is that it’s hard work. It can be overwhelming. You don’t have the kind of established relationship with your creditors that a reputable debt settlement company might have. As a result, you may not be able to secure the kind of favorable terms that a debt settlement company can. With that said, if you feel capable of handling this process, you’ll save a great deal in fees. And sometimes, creditors will deal with account holders directly but won’t work with debt settlement companies, so you might not always have a choice of how to proceed. If you do decide to do your own debt settlement, always get a written debt settlement agreement from the creditor before sending any money.
Research South Carolina Debt Settlement Companies
Before you sign up with a South Carolina debt settlement company, sometimes called a debt-relief company, they must give you some information about their debt settlement program. By law, they must tell you how long it will take before they will make an offer for each creditor. The company must tell you what percentage of each outstanding debt you will need to have available before they will make an offer to your creditors.
When researching South Carolina debt settlement companies, there are a few signs that a company isn't a good option for you. Do they tell you about exciting opportunities associated with new government programs? If they do, it's usually best to look at another company. If the debt settlement company wants you to pay fees before they settle any of your debts, this isn't the debt settlement company for you.
Before doing business with any company that will have access to your finances, research its rating with the Better Business Bureau. Since some debt settlement companies are scams, the next place to look is the South Carolina Department of Consumer Affairs' Consumer Complaint Database. It may be a good idea to call the South Carolina Attorney General's Office at either of these phone numbers: (803) 734-4200 or toll-free at (800) 922-1594. These phone numbers allow you to ask consumer questions, such as whether there have been consumer complaints filed against a particular company or about the reputation of a company you’re interested in working with.
How to Make Your Debt Settlement Work
Whether you are building up your balance with a South Carolina debt settlement company or you’re about to make a large payment to one of your creditors to settle your debt via a lump sum, it's a good idea to avoid scheduling these debt payments for a time of the month when you have other large bills due.
Staying on budget is essential when making payments into an escrow account or a short-term installment agreement with a creditor. To stay on budget, it’s necessary to set aside some money for expected payments that happen less often than monthly. Examples of such expenses are routine car maintenance or quarterly insurance payments. It’s also a good idea to set aside funds for emergencies.
Staying on a budget is difficult for many people. Make sure to provide small rewards for yourself every once in a while. This increases your chances of staying on budget. If you work out or run without taking breaks, you're much less likely to complete your workout or run. The same holds true for budgets.
Alternatives to Debt Settlement
Debt settlement is the best debt management solution available for some people. For example, debt settlement may be the best solution available for resolving a private student loan if your credit score is already low and you have access to property you can sell to fund your settlement offers. But, debt settlements aren't the best solution for most people. Debt settlements tend to be risky, lower your credit score, and require large sums of money to be available at the time of settlement. There are several debt management alternatives to settlement that are available to those seeking to regain their financial footing. It’s important to explore all your options before committing to one solution or another.
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South Carolina Debt Consolidation
A South Carolina debt consolidation may be a great option for you if your credit score is high enough that you can secure a new line of credit at a favorable interest rate. You use this line of credit to act as a balance transfer for your existing debt. This balance transfer is used to restructure your debt so that you only have to make a single payment each month on your consolidated accounts. Debt consolidation loans may be unsecured, such as personal loans and credit card balance transfers. Other consolidation loans may be secured, such as a home equity line of credit.
South Carolina Debt Management Plan
A South Carolina debt management plan is a form of debt consolidation that uses a middle man to combine your debts. The “middle man” is a credit counseling agency that negotiates with your creditors to create a restructured payment plan with lower interest rates. The credit counseling agency then collects one monthly payment from you. It uses that monthly payment to pay all your consolidated accounts. A debt management plan is a great option if your credit score isn't high enough to secure a new line of credit but you could benefit from consolidating your debt. Unlike a debt settlement, a debt management plan leaves your creditors paid in full. For this reason, these payment plans don't have such a negative impact on your credit score.
South Carolina Bankruptcy
A South Carolina bankruptcy is an excellent solution that anyone with significant debt problems should consider. Contrary to a popular myth, few people lose anything in bankruptcy. Well, you do lose one thing: debt. Another myth is that bankruptcy destroys your credit. The truth is, for most people that file bankruptcy, within a couple of years, their credit is better than the day before they filed bankruptcy. Individuals eligible for Chapter 7 bankruptcy should know that Upsolve can help people file their own bankruptcy for free.
