How to Settle Your Debts in Georgia

Collect the Details About Your Debts 

Step one is to gather as much information as possible about your debts and overall financial situation. Although recent credit card and loan statements for debts you wish to settle are especially important, information about loans you do not wish to settle can help to paint a more accurate version of your bigger financial picture. Statements include important information, including current interest rates, outstanding balances, monthly payments, types of debts (student loans, credit cards, medical bills), and whether or not the loan is a secured or unsecured debt. 

It is also helpful to obtain a copy of your credit report prior to working with a credit counselor or debt settlement company. When a person defaults on their loans, it is common for the loans to be sold to another creditor. This updated information is necessary so that the person negotiating with creditors knows who to contact. A credit report also provides a comprehensive look at all of your liabilities and creditors, as well as your FICO credit score. 

Collect Details About Your Ability to Settle Your Debts

In order to effectively negotiate with creditors, it’s important to first determine your ability to settle each of your debts. In doing so, your income is just as important as knowing how much debt you have. But what qualifies as income? For example, if you are unemployed but receiving social security benefits, does this compensation count as income? 

Although social security benefits are protected from creditors, other forms of income from non-employment sources may not be. Furthermore, compensation doesn’t have to be taxable income to count. Generally speaking, if you have money available to cover living expenses, it will be considered as income. And any money that remains after you have paid living expenses is your disposable income. The information you should gather to accurately determine your monthly income and disposable income includes: 

• Two recent paycheck stubs (should be representative of a typical work week, not low due to excessive time off or high due to lots of overtime)

• Information about spouse’s income

• Debts

• Community debts with spouse (co-signed loans, etc.)

• Fixed costs, such as rent, car insurance, internet

• Variable costs, such as groceries, entertainment, fuel 

By gathering this information, you can determine your disposable income, which is the amount of money you have left after paying expenses and debts. This is what you can afford to pay to your creditors in a debt settlement arrangement. Unfortunately, if you have no money left after paying for living expenses, a debt settlement arrangement may not work for you.

Learn About the Costs to Settle Your Debts in Georgia 

Regardless of what route you choose—debt settlement company or settling on your own—you will incur certain costs. These are likely to include late fees on past due accounts or those you defaulted on, and other penalties related to default. If you choose to work with a Georgia debt settlement company, you will also pay fees for their services. These may include: 

• Bank fees for depositing monthly payments into an escrow account.

• Debt settlement fees based on total debt if you owe a lot. 

• Debt settlement fees based on total savings if you don’t owe a lot. 

Debt settlement companies structure their fees differently, but certain rules apply. For starters, the company can only charge a portion of the full fee prior to settling a debt. Once the debt is settled, the company can charge you the remainder of its fee. Furthermore, if the company charges a contingency fee based on your savings, it must disclose the percentage of debt it charges as a fee, as well as what this amounts to in dollars. 

Decide Whether to Work with a Georgia Debt Settlement Company

As stated above, you can choose to settle debts on your own, without the help of a Georgia debt settlement company. In some cases, it may actually be in your best interest to go it alone. If you are organized, computer savvy, and unafraid of negotiating with creditors, you may be a good candidate for self-directed debt settlement. The pros and cons of doing it yourself include:

Pros: 

• No debt settlement company fees

• Maintain complete control

• Ability to settle with creditors who refuse to work with debt settlement companies

Cons: 

• Doing it alone can be time intensive and overwhelming

• Lack of insider knowledge about how to negotiate with creditors

• No one to give advice or tell you if you’re doing something incorrectly

Research Georgia Debt Settlement Companies

If you choose to work with a debt settlement company, make sure to research different companies before deciding on one. Debt settlement companies are required to give you information about their programs. This information includes pricing, terms and conditions, how long they estimate it will take to settle with each creditor, and potential negative consequences of debt settlement, such as a lowered credit score, additional creditor fees and interest, and the possibility of getting sued. You may also continue to receive collection calls from creditors and collection agencies while you are making escrow payments to a debt settlement company. 

Although many debt settlement companies are highly reputable, scams do exist. Do your homework. You can search for complaints about a debt settlement company with Georgia’s Attorney General, or through the Better Business Bureau’s website.

How to Make Your Debt Settlement Work

Once you’ve entered into a debt settlement arrangement, it’s important to ensure that the arrangement is working for you. Are the payments being made as agreed upon? Does the payment due date make sense? The tips below can dramatically improve your chances of success. 

• Select a due date that does not coincide with your mortgage payment or other large monthly expense. 

• Budget for unforeseen expenses and other large one-time expenses, such as car inspections or annual registration. 

• Reward yourself when a settlement arrangement with one of your creditors is paid in full.  

• If you can make extra payments, do it. 

Keep in mind that leaving some credit cards open while settling other cards carries risks, especially if you have multiple cards with one bank. If the bank sees that you are struggling to pay the higher-balance cards, it may close even low-balance cards you are current on. Even if you have credit cards with a zero balance, your limits may be dramatically reduced, or the cards may be closed, if the credit card company finds out you are settling with other creditors. Furthermore, if creditors discover that you are settling with other banks, this knowledge may be used to negatively impact future settlement offers.

Alternatives to Debt Settlement

Although debt settlement arrangements can provide protection and debt relief to many individuals who are in over their heads, these programs are not for everyone. If after reading this article or completing a credit counseling session, you believe that debt settlement is not right for you, consider some alternatives. The sections below provide information on different types of debt management and consolidation. Depending on your unique circumstances, one of these programs may be a good option for you.