How to Settle Your Debts in Wisconsin
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Below, you will learn what you need to collect to ensure that the debt settlement process runs smoothly. You will also learn about other options available to you if debt settlement isn’t a good fit for your situation.
Written by Upsolve Team.
Updated February 25, 2020
If you’re struggling with debt but you can afford to resolve a significant portion of at least one of your debt-related accounts, you can look into debt settlement to help you manage your finances. Debt settlement is a process wherein you either make lump-sum payments or very few installment payments to your creditors in exchange for partial debt forgiveness. Meaning, you offer your creditors a lump sum payment (or very few installments) to resolve your balance and in return for your large, upfront funds, your creditors forgive part of your balance owed and close out your accounts accordingly. If you don’t have the cash flow to offer your creditors settlements within a short amount of time, debt settlement is probably not a good option for you. Thankfully, there are other debt management options available to you that are worth considering. A few are detailed at the end of this guide.
If debt settlement is a good option for you, it can help you to eliminate high interest rates, stop harassing collection calls, and reduce the amount of debt you’re currently juggling. Deciding whether to hire a debt settlement company to help you manage your finances can be daunting. Know that you can approach the process of debt negotiation yourself if you have the time to put aside. To begin, you will need to gather all of your bills and see what type of debt you have. Debt settlement is primarily a good option for people who have unsecured debt, as secured creditors generally prefer to exercise their repossession rights in the event that a debtor defaults.
Note that unlike the debt consolidation process, you need to actually be behind on your account(s) to propose a debt settlement arrangement to your creditors. A creditor has no interest in settling with people who are able to pay their bills consistently. A creditor wants to receive everything that is owed to them. Thus, if you are current on your bills, there is no financial incentive for a creditor to offer you a settlement. Once you are more than three months late on your account, your creditor will likely assume that you can’t pay your debts. Creditors know that once an account is in default for over three months, the likelihood of them getting repaid in full is unlikely and they generally become more willing to settle. However, this does not mean that you should stop paying your bills in an effort to qualify for debt settlement. Doing so will result in a negative impact on your credit. If you’re not behind on your bills, you may want to look into debt consolidation or debt management plan to more effectively streamline your debt.
Learn More Through Free Nonprofit Credit Counseling
Anyone thinking of pursuing debt settlement should consider scheduling a no-cost credit counseling session before committing to this process. Credit counseling is a good place to educate yourself about the debt management options that are available to you. You can receive free credit counseling from an accredited nonprofit credit counseling agency. When you sign up for credit counseling, a credit counselor will work with you to come up with a financial plan tailored to your unique circumstances and financial goals. They can help you determine whether debt settlement is a good option for you. They can also give you recommendations about any debt settlement companies they may be familiar with.
How to Settle Your Debts in Wisconsin
Below, you will learn what you need to collect to ensure that the debt settlement process runs smoothly. You will also learn about other options available to you if debt settlement isn’t a good fit for your situation.
- Collect Details About Your Debts
- Collect Details About Your Ability to Settle Your Debts
- Learn About the Costs to Settle Your Debts in Wisconsin
- Decide Whether to Work with a Wisconsin Debt Settlement Company
- Research Wisconsin Debt Settlement Companies
- How to Make Your Debt Settlement Work
- Alternatives to Debt Settlement
Collect Details About Your Debts
Before starting the debt settlement process, you will need to gather all of your debt-related account statements so that you determine which debts might be good candidates for settlement. Note that debt settlement companies will generally only work with you to manage your unsecured debt. So, if your debt is mostly secured, you will need to look into another debt management process. Start by gathering your most recent account statements that show your balance, interest rate, and monthly payment. Review this information carefully so you know exactly how much you owe. As bills continue into non-payment status for an extended period of time, they often get sold off to other creditors and collection agencies. To get the most accurate information about which company is holding your debt, you can pull a free credit report online from the three major credit bureaus (ie. Equifax, Transunion, and Experian).
Collect Details About Your Ability to Settle Your Debts
You will only be able to enter into a debt settlement program or negotiate debts on your own if you have the financial ability to offer your creditors lump-sum payments or very short-term installment payments. Keep in mind that some creditors won’t allow you to pay off the debt in installments so you may need to have the ability to offer lump sums for those debts you hope to settle.
To take advantage of the debt settlement process, you will need to carefully go through your income and expenses to determine how much you can afford to pay your creditors each month (in the event that an installment plan is an option for you). Look over all of your monthly expenses carefully to see how much you need to put aside for basic needs before paying your creditors. Reviewing your bank statements is a good place to get a rough estimate of how much you spend on expenses.
Learn About the Costs to Settle Your Debts in Wisconsin
If you choose to work with a debt settlement company, there will be fees involved to settle your debt. Even if you decide to pursue debt negotiation on your own, as your accounts continue to go into default, late fees, interest and penalties will accrue until you reach a settlement agreement with your creditors.
Note that debt settlement companies have an obligation to inform you about their practices and how their businesses are run. They are never allowed to collect fees from you until your account has been successfully negotiated (and in many cases, settled). Moreover, they are not allowed to make false promises to you. Many companies will try and guarantee potential clients that they can settle your debts. However, no one can guarantee they will be able to settle your debts because your creditors have control over whether or not they will accept settlement arrangements. Some debt settlement companies base their fee structure on the amount they save you, while others will charge a fee based on the total amount you owe. If the company bases its fees on the percentage they save you, they are more inclined to get you a better settlement. If the company charges its fees this way, they must tell you how much they are settling the account for before accepting any settlement agreement.
Decide Whether to Work with a Wisconsin Debt Settlement Company
Working with a debt settlement company can help take a lot of pressure off of your shoulders. A debt settlement company will take control of your debts and speak with your creditors directly to arrange settlements with them.
Alternatively, you can conduct debt negotiations on your own. Doing it yourself can keep you in control of your finances and save you a lot of money. Taking control of your negotiation process will also allow you to settle with creditors who won’t work with debt settlement companies. However, you’ll need to prepare for the fact that a DIY approach is very time-consuming. You can spend hours on the phone negotiating back and forth with creditors. For some people who have busy schedules, are not well organized, and get stressed out easily, self-directed debt negotiation is probably not the best idea.
Research Wisconsin Debt Settlement Companies
There are a lot of debt settlement scams out there. It is therefore important to tread lightly before signing up with any particular Wisconsin debt settlement company. To better ensure that you find a reputable debt settlement company to work with, you can check the following for a company’s reputation/complaint history:
The Wisconsin Attorney General’s website
The Attorney General’s website and the Department of Consumer Protection handle complaints against companies who engage in unfair business practices. If you would like to speak to someone on the phone, you can call (800)-422-7128. For any specific questions, you can also send an email at DACTPhotline@wisconsin.gov.
Before signing up with any debt settlement company, you will want to make sure the company is honest about its services. Any Wisconsin debt settlement company must tell you:
The timeframe necessary to achieve results
How much the total process will cost and when you will need to pay
The potential negative consequences of using a debt relief service
Some debt settlement companies will only tell you the “great things” that can be achieved if you hire a debt settlement company to work with. Keep in mind that there are many disadvantages to pursuing debt settlement. Some negative consequences include: risks of lawsuit, lowered credit scores on your credit report, additional fees, and interest.
As you put money aside to settle your debts, most companies will have you put your funds into a separate bank account or escrow account. Any money that you accumulate into that account is yours. This means that your debt settlement company can’t charge you any penalties for taking out that money at any time.
How to Make Your Debt Settlement Work
To ensure the debt settlement process runs smoothly, it is crucial that you don’t fall behind on your payments. Even missing one payment can cause your account balance to again become due in full. If you foresee that you won’t be able to negotiate payments any longer, you will need to let the debt settlement company know immediately so that you don’t continue throwing money away. In this case, you may benefit from exploring a debt management plan option, debt consolidation, or bankruptcy. Also, don’t forget to put money aside for the taxes you may owe on the portion of your debt that has been forgiven, as these won’t come due until the end of the year.
Alternatives to Debt Settlement
Not everyone will be able to pursue debt settlement successfully. For people who can’t, there are other programs available to them to help with their financial challenges. Take a look below at some of the other options available to you.
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Wisconsin Debt Consolidation
Consolidating your debts with a Wisconsin debt consolidation loan can help you if debt settlement is not a good option for your situation. Debt consolidation involves securing a new line of credit to use as a balance transfer. You then make one payment per month on the account that holds your consolidated debt. This process can help to reduce how much you pay creditors on a monthly basis, as your minimum payment for your consolidated loan will likely be smaller than the combined total of the multiple minimum payments you usually make. To qualify for a debt consolidation loan, you will need to have a good credit score, therefore this option may not be available to you at this time. If not, consider a debt management plan (which is not credit score dependent) or bankruptcy.
Wisconsin Debt Management Plan
A Wisconsin debt management plan can help you reach your financial goals. Regardless of your credit score, a credit counselor can negotiate with your creditors to construct a consolidation payment that meets your budget. You’ll then make one payment each month to your credit counseling agency, which will then distribute your funds to your creditors per the terms of your DMP.
Wisconsin Bankruptcy
If you can’t make upfront settlement offers, bankruptcy can also be a good way to get out of debt and start over financially. Bankruptcy can potentially eliminate your unsecured debt fast. People with high medical debt, credit card bills and personal loans can use bankruptcy to help get them back on their feet. Upsolve can help you file for bankruptcy either on your own or with the assistance of an attorney.
