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How to Settle Your Debts in West Virginia

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In a Nutshell

Read on to learn about the steps you’ll need to take to achieve a successful debt settlement. If you determine that debt settlement isn’t the best option for you, note that other potential debt-relief options are explored at the end of this guide.

Written by Upsolve Team
Updated March 19, 2020

Financial challenges happen to most people at some point in their lives. If you’re feeling financial pressure and are getting behind on some of your bills, you’re certainly not alone. Know that many resources and potential solutions are available to you, if you’re willing to put in a little time and effort into determining which might best fit your unique circumstances. For example, a West Virginia debt settlement may be a good option for you. In a debt settlement, you settle your debt for a large lump-sum payment that's less than the total debt due. In exchange for this large lump sum payment (or two or three payments, if your creditor is amenable to this arrangement), your creditor will partially forgive your debt and close your account. The creditor won't allow a long-term payment plan because they don't want to risk further default. Since you aren't paying the full amount due, a debt settlement will initially harm your credit score. However, a debt settlement can put you in a better financial position generally and this will make it easier to rebuild your credit over time. 

Debt settlements work best for certain unsecured debts. These debts include credit cards, most store charge cards, gas cards, signature loans, deficiency balances after repossessions, and any unsecured debt that has been sold to a collection agency. You may negotiate your debt settlement yourself or you may retain the services of a West Virginia debt settlement company. Sometimes, a loan is not a good choice for a debt settlement because of the particular creditor. The creditors do not have to accept a debt settlement. For example, credit unions and American Express generally will not accept a debt settlement proposal. 

Learn More Through Free Nonprofit Credit Counseling

Before you commit to the debt settlement process, you’ll want to schedule a free credit counseling session with a nonprofit, accredited credit counseling agency. At your initial free credit counseling session, your credit counselor will look at your bills, paycheck stubs, and bank account statements. Your counselor will use these documents to evaluate your income, expenses, and debts. You and your counselor will then set personal finance goals. At the end of the session, your counselor will make personalized recommendations and provide you with an action plan designed to help you meet the goals you set earlier in the session. This service is free and available to anyone. 

Depending on the details of your unique situation, your credit counselor may recommend a debt management plan, a debt consolidation loan, bankruptcy, or a debt settlement. The only one of these options that the credit counseling agency can manage for you is a debt management plan. Since consolidations use loans and an agency doesn’t function as a bank, the credit counselor can't set you up with one. The creditor counselor isn't an attorney, so the credit counselor can't file for bankruptcy on your behalf. While your credit counselor won’t do a debt settlement for you, they may be able to refer you to a reputable West Virginia debt settlement company. Debt settlement companies are sometimes referred to as debt-relief companies.

How to Settle Your Debts in West Virginia

Read on to learn about the steps you’ll need to take to achieve a successful debt settlement. If you determine that debt settlement isn’t the best option for you, note that other potential debt-relief options are explored at the end of this guide.

Collect the Details About Your Debts

To prepare for your debt settlement process, look at your recent credit card bills and other debt-related bills. Look at the interest rate on each bill. Look at the minimum monthly payment and the outstanding balance. If you don't have the statements for any of your bills, a good place to look is the online banking sites for the bank, credit card company, or other loan company. Use these statements to determine which unsecured debts are most suited for debt settlement. If you hire a West Virginia debt settlement company, they will also need copies of these documents. Also, your credit counselor may benefit from looking at these statements, so it is a good idea to have them “at the ready.”

In preparation for any debt management solution, including settlement, you’ll also want to pull a copy of your free credit report from all three credit bureaus. This is an important step because you need to make sure you haven't forgotten any creditors when evaluating your debt load. Also, oftentimes when debts are in default, creditors will sell your debts to debt buying companies. These debt collection firms become your new creditors. At this point, a debt buyer is who you have to negotiate with if you’re interested in settlement. Your credit report will show if your debt has been bought by one of these companies.

Collect Details About Your Ability to Settle Your Debts

If you’re working with a West Virginia debt settlement company and you’re building up a balance in an escrow account (or saving to make short-term installment payments directly to a creditor), know that a budget is one of the most important parts of the debt settlement process. When creating a budget, the first factor to consider is your income. For most people, this means looking over your paycheck stubs. It's good for these stubs to be recent, as you’ll want to accurately estimate your incoming income for the next few months. It's more important that these paychecks represent your normal income. If you have a paycheck that shows a lot of overtime, and you don't usually get a lot of overtime, this isn't a good stub to use. Once you have the paycheck stubs, you will average your take home pay so that you know (with relative certainty) how much money you’ll be bringing in over the few months you’re working to settle your debts.

If you’re trying to settle your debts with money that you already have, know that one of the worst mistakes you can make is to use money from your retirement plan to pay your unsecured loans. If you're younger than 59 1/2 years old, you will pay a tax penalty to the IRS for withdrawing this money. At any age, you'll pay income taxes if you have a traditional retirement account. If you're nearing retirement, you will be reducing the necessary funds you have to live on during retirement. It is better to use your income or to sell something to have the money for a debt settlement offer. If you can’t come up with the money to make a debt settlement work, don’t panic. You can explore debt management alternatives that may be excellent options for your situation.

Learn About the Costs to Settle Your Debts in West Virginia

There are several costs you'll incur as you move forward with a debt settlement program. Not paying the creditors you intend to settle with will cause you to accumulate late fees, higher interest rates, along with other fees and penalties. If you succeed with your debt settlement plan, your settlement amount will be much lower than when you started, so these expenses won't matter. If you succeed, you will also have to pay income taxes on the amount of debt that was forgiven. If you fail with your debt settlement plan, you'll be in worse shape than when you started because you will have accrued late fees and penalties that are irreversible. No creditor is required to agree to a settlement, so this process is risky. 

Additionally, there are a few costs associated with hiring a West Virginia debt settlement company. You will have to pay the debt settlement company a fee whenever it successfully settles a debt for you. You will also have bank fees associated with a third party account that you’ll have to keep. This third party account is often called an escrow account. The administrator of the account is independent of the West Virginia debt settlement company. The money held in the account is for your debt settlement offers. The money is still yours until it's paid out and you're entitled to any interest on the account but it does cost a little to set up. 

Decide Whether to Work With a West Virginia Debt Settlement Company

You don't have to hire a West Virginia debt settlement company if you’d prefer to negotiate with your creditors on your own. However, for many people, “doing it yourself” isn't a good idea. This is a time intensive and stressful process and you don’t have the kind of insider knowledge about your creditors and the settlement process that debt settlement companies do.

With that said, you may be a good candidate for pursuing your own debt settlement if you're organized, you like negotiation, and you’re good at keeping up with a lot of facts and figures. Doing the debt settlement yourself allows you to avoid the fees that the debt settlement company would charge you. You don't have to worry about the debt settlement company keeping you in the loop because you are the one dealing with the creditors. If you decide to do your own debt settlement, make sure to get a written settlement agreement with any creditor before sending them any money.

Research West Virginia Debt Settlement Companies

Before agreeing to work with any financial company, check the company's rating with the Better Business Bureau. Researching a West Virginia debt settlement company is important because some debt settlement companies are scams. You can additionally call this phone number: 1 (800) 368-8808, which is the West Virginia Attorney General's Consumer Protection Hotline. Ask them if there have been any complaints filed about the debt settlement company you're interested in hiring. Lastly, look at the Consumer Financial Protection Bureau's Consumer Complaint Database. This is a nationwide database that will allow you to look for fraud or scam complaints. Then, read the statements to see if the accusation makes sense to you. You can look at the top right corner of the complaint and see the state of the complaining consumer. You may want to take special notice of any complaints coming from West Virginia.

How to Make Your Debt Settlement Work

When using a payment plan with a West Virginia debt settlement company or directly with a creditor, keys to making your debt settlement program work involve creating a solid budget and sticking to it. Your budget should allow money for infrequent but expected expenses such as routine car maintenance. Your budget should also allow for emergency expenses so that you don’t endanger your ability to make your debt settlement payments because you’re juggling these other expenses.

Also note that during a debt settlement process, if you are using a credit card from one bank while trying to settle credit card debt with another bank, there could be a problem. Every credit card agreement gives the credit card company the right to check your credit report whenever they want to. If the bank for the credit card you're keeping sees that you're trying to settle with another credit card company, they may become concerned about your ability to pay them. They could reduce your credit limit or close your account even if you have a zero balance with them.

Alternatives to Debt Settlement

For most people, debt settlements aren’t the best option available; alternative debt management solutions are better suited to an individual’s circumstances. It is (understandably) usually difficult for someone who is already behind on their debts to be able to gather enough money for large lump-sum payments. The rest of this guide will examine alternatives to debt settlements that may be worthy of your consideration. Debt consolidations and debt management plans won't harm your credit as much as a debt settlement will. For many people, their credit will recover quicker from bankruptcy than it will from a debt settlement!

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West Virginia Debt Consolidation

In a West Virginia debt consolidation, you use a new line of credit as a balance transfer so that you can pay off your existing loans. This way, you streamline your debts into a single account (usually with more favorable terms than your current debts feature), payable monthly. This kind of consolidation is a great option if your credit score is high enough to qualify for a loan that will pay off the debts you wish to include. The consolidation loan can be an unsecured debt, such as a personal loan or credit card balance transfer. It could also be a secured loan, such as a home equity loan. 

West Virginia Debt Management Plan

A West Virginia debt management plan is a form of debt consolidation. A debt management plan (DMP) uses the services of a credit counseling agency (instead of a loan) to combine your debts into a single account, that is paid once monthly. This payment is made to the agency, which then pays your numerous creditors per the terms of your plan. DMPs are good if your credit score isn't high enough to secure a favorable debt consolidation loan. Since debts included in a DMP are paid in full, a DMP doesn’t harm your credit score as much as a debt settlement. 

West Virginia Bankruptcy

If other debt-relief options won't work for you, don't hesitate to consider a West Virginia bankruptcy. Bankruptcy is the most powerful debt solution available, as it has the ability to eliminate your eligible debts in as few as 90 days. Upsolve provides a free tool for you to file your own Chapter 7 bankruptcy in cases that don't require the assistance of a lawyer. However, if you’d like to work with a lawyer, Upsolve can help you find a reputable firm in your area. 

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