If you’re interested in learning more about whether debt settlement may be a good option for you, this guide will help you make that determination. If you choose to move forward, you’ll find information on next steps below. If you need to explore debt management alternatives, you’ll find information on some potential options at the end of the guide.
Written by Upsolve Team.
Updated January 5, 2022
Millions of Americans are overwhelmed by having to make multiple payments each month to meet their debt-related financial obligations. If you’re all too familiar with this challenging reality, rest assured that help is available. Multiple debt relief options exist for those who want to make paying down their debts a more manageable process. This guide focuses primarily ondebt settlement programs, but it also introduces several debt relief and debt management alternatives so that you can begin to determine which option may be best for you.
The debt settlement process allows you to resolve your debts for less than the full amount you owe your creditors. A Utah debt settlement company can assist you in this process, negotiating with creditors on your behalf. You can also enter into debt negotiations directly with credit card companies and other unsecured creditors. Secured debts, such as car loans, should not be included in settlement plans as they are secured by collateral (your car, for example) that will likely be repossessed if the loan isn’t paid in full. As a result of their repossession rights, secured creditors don’t tend to agree to settlement offers as their bottom line is better served by taking your property back. Whenever possible, don’t default on secured loans if you want to keep your property.
With that said, many kinds of unsecured debt are good candidates for settlement once an account is past due for more than 90 days. When people fall more than 90 days behind on accounts, they are unlikely to ever pay off the total amount of their debt. Creditors know this. As such, they would rather take a settlement offer than receive nothing at all. Something is always better than nothing in the eyes of the creditor. This reality provides an incentive for creditors to work with you if you’re looking to settle your past due accounts.
The best types of debt for settlement include credit card debt on low-balance cards issued by banks or retailers, gas cards, signature loans, third party collection accounts, and outstanding balances after the repossession of a vehicle.
Now that you’ve determined whether your particular debts may be good candidates for settlement, it’s time to consider whether your financial situation will allow you to successfully settle any of your debts. If you're still current on payments, creditors have no incentive to accept a settlement offer. In general, you should be at least 90 days behind on accounts before you propose a settlement.
Additionally, you should have enough money to pay the agreed-upon settlement, but not enough to pay the full debt amount owed. This is true whether you decide to negotiate directly with creditors or work with a Utah debt settlement company. Generally speaking, you will need to have enough income available (or property to sell) to fund your settlement offers immediately or be in a position to save enough to fund an offer within 2-3 months. The longer your accounts remain delinquent, the more fees and penalties will accrue, and the more you’ll risk being sued by your creditors. If you can’t settle your debts quickly, an alternative debt management solution may be preferable.
Learn More Through Free Nonprofit Credit Counseling
At this stage in the process, the most important thing you can do is gather as much free information and advice from reputable sources as possible concerning your debt management and debt relief options. It is unwise to commit to a specific plan of action until you learn about the pros and cons of each option. Fortunately, accredited, nonprofit credit counseling agencies offer free credit counseling to individuals who are struggling with debt and interested in learning more about their options. Attending a free counseling session does not commit you to any kind of action.
Credit counselors are trained in money management and are capable of conducting a thorough analysis of your overall personal finance situation. During your session, they will examine your income, debts, property, and goals before determining the debt relief option(s) most suited to your unique needs. At the end of your session, they'll send you on your way with an action plan for achieving both short-term and long-term goals. Credit counseling is almost always a win-win. And given that it’s free, you have nothing to lose by scheduling a no-cost session with an accredited counselor.
How To Settle Your Debts in Utah
If you’re interested in learning more about whether debt settlement may be a good option for you, this guide will help you make that determination. If you choose to move forward, you’ll find information on next steps below; if you need to explore debt management alternatives, you’ll find information on some potential options 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 Utah
- Decide Whether to Work with a Utah Debt Settlement Company
- Research Utah Debt Settlement Companies
- How to Make Your Debt Settlement Work
- Alternatives to Debt Settlement
Collect the Details About Your Debts
Before moving forward with any type of debt relief program, it is important to have a clear picture of your financial situation. Whether you’re meeting with a credit counselor, a debt settlement company, or approaching creditors on your own, it is important to obtain statements from bank accounts, credit cards, and other loans to provide details about your accounts. Most statements will indicate:
Monthly minimum payment amounts
Whether debt is secured or unsecured
It’s also a good idea to obtain a copy of your credit report, which will provide additional details about your creditors and debt load. Having this information handy will be helpful during credit counseling, as you evaluate how to resolve each debt, and as you seek the best possible debt settlement offers available (should you opt to move forward with the debt settlement process).
Collect Details About Your Ability to Settle Your Debts
In order to determine whether you can settle your debts, you need to know whether you can afford to fund settlement offers likely to be accepted by your creditors. If you don’t have immediate access to a lump sum of money and you don’t have property that you can sell to fund your offers, you’ll need to know how much disposable income you have available each month. Disposable income is the amount of money that is left after you subtract monthly expenses from your monthly income. If you have enough disposable income available that you can save up money to fund a settlement offer within 2-3 months, you may be able to make the debt settlement process work for you.
Once you have calculated how much income you’ll have coming in over the next 2-3 months, you’ll need to add up your monthly expenses, including fixed and variable costs. Fixed expenses don’t change from month to month, whereas variable expenses, such as groceries, can vary widely. Once you have subtracted fixed and variable expenses from your true income, you are left with your disposable income. This is the amount that can go toward monthly debt settlement payments, or a lump sum payment.
If your disposable income is extremely low, or you don’t have any to speak of, debt settlement may not be a good option. In this situation, it is possible that Chapter 7 bankruptcy may be a good alternative or you may benefit from entering into a debt management plan. Both options are introduced at the end of this guide.
Learn About the Costs to Settle Your Debts in Utah
Late fees and penalties incurred on past due accounts can add up to hundreds or thousands of dollars. It’s important to keep this reality in mind when thinking about how long it may take to settle your debts. If you can’t settle your debts quickly, the costs associated with this process may outweigh the benefits. In addition, it’s important to remember that you’ll need to pay fees to a Utah debt settlement company if you choose to avoid negotiating with your creditors directly. Fees are typically charged as a percentage of total debt, or a percentage of total savings. The second option is preferable, as it will help inspire the debt settlement company you’re working with to get you the best deal possible. Any way you slice it, debt settlement tends to be expensive. It can still be a great option, but it’s something you should be aware of before committing to the process.
Decide Whether to Work with a Utah Debt Settlement Company
If you decide to pursue debt settlement, you’ll need to determine whether you’ll work with a Utah debt settlement company or negotiate with creditors on your own. Although anyone can settle debts on their own, not everyone should.
If you are comfortable negotiating with creditors, have some time and energy to spare, and only have a few delinquent accounts, self-directed debt settlement might be a good option for you. It will save you in fees and other expenses, and you can remain in control throughout the entire process.
If, on the other hand, you are intimidated at the prospect of dealing with creditors directly, or you have lots of delinquent accounts, it may be in your best interest to work with a debt settlement company. Doing so will help to ensure that creditors accept a reasonable settlement amount, and you won’t need to invest time into dealing with creditors directly.
Research Utah Debt Settlement Companies
Although many companies are reputable and truly want to help their customers, there are plenty of scams out there. Protect yourself by visiting the Utah Attorney General’s website and theBetter Business Bureau website before entering into any kind of debt settlement agreement. You can use these resources to research the reputation of any companies you’re interested in dealing with. Although all companies will likely have some complaints filed against them (no one’s services please everyone) if an unusual number of complaints have been filed against a company or complaints are particularly egregious, you may want to look elsewhere for assistance.
How to Make Your Debt Settlement Work
If you are serious about getting out of debt, you’ll want to do everything possible to ensure that your debt settlement plan is set up to work in your favor. Don’t agree to a monthly payment or lump sum that you cannot afford, or choose a due date that coincides with another large monthly expense, such as your rent or mortgage payment. Calculate the amount of disposable income you have each month, and base your monthly debt settlement payment on that amount. Do your best to stick to your scheduled payments and make extra payments whenever possible. The sooner you get your debts settled, the sooner you can begin rebuilding your credit score.
Alternatives to Debt Settlement
Debt settlement is far from the only debt relief solution out there. If you have determined that debt settlement isn’t right for you, consider one of the alternatives below. From debt consolidation loans to bankruptcy, each type of debt relief has advantages and disadvantages. Some have tax consequences and some do not. Some will have a negative impact on your credit score, and others will not. Before deciding what option is best for you, consider scheduling a free credit counseling session with a counselor employed by an accredited, nonprofit credit counseling agency. They will be able to tell you whether any of the following options is a viable solution for your unique challenges.
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Utah Debt Consolidation
Securing adebt consolidation loan is arguably the least disruptive form of debt relief available, from the perspective of maintaining a good credit report and not being hassled by creditors. However, it is rarely a viable option for individuals who are struggling with debt because this debt management option requires an excellent credit score.
In most cases, by the time people are considering debt relief options, they have already fallen behind on loan payments. With that said, if you have a great credit score and can secure a new loan with favorable terms, you can use this option to combine your many high-interest unsecured debts into one account. This option can save you time and streamline your repayment process.
Utah Debt Management Plan
Adebt management plan is a type of debt consolidation, but it is not a loan and therefore does not require good credit. Instead of having to pay multiple creditors each month, you make one monthly payment to a credit counseling agency, which is then distributed to your creditors by the agency.
If you have the funds to pay your debts, but you need the breathing room provided by an extended payment schedule and lower payments, a Utah debt management plan may work for you. If your disposable income is too low to accommodate the regular payments associated with a debt management plan, debt settlement or bankruptcy may be a better fit.
Hundreds of thousands of Americans file forbankruptcy each year due to overwhelming debt. As long as you have an action plan for rebuilding your credit moving forward, filing for Utah bankruptcy can be exactly what you need to regain control of your finances and achieve your savings and retirement goals.
If you don’t earn much income and you are thinking about filing for bankruptcy but you can’t afford legal counsel, Upsolve has a tool to help you file your forms for free. We're a nonprofit that helps low-income individuals file Chapter 7 bankruptcy.