How to Settle Your Debts in Michigan

Collect the Details About Your Debts

The first step for a successful debt settlement is to do a close analysis of your debts. Get your bills together. When looking at your bills, pay attention to the interest rates, monthly payments, and balances. Get your free credit report. Make sure to get the report for all three agencies. Look at the credit reports to make sure you are taking all your debts into account. Make sure you have the right creditor for each debt. For the debts that are in default, creditors will often sell your debt to a debt-buying firm. If this is the case, the debt-buying firm is now your creditor for that debt.

Debt settlements can cover many types of debt. One type of debt to pay close attention to is student loans. If other student loan relief options won’t work for you, debt settlements are an option. Debt settlements are an option with federal student loans but can be more effective when the student loan is from a private lender.

Collect Details About Your Ability to Settle Your Debts

The next step is to look at your budget. Make sure that another debt relief option besides debt settlement will not work better for you. Determine what your monthly income is. For the purposes of this budget, we aren’t talking about taxable income. We are talking about money that you receive that can go toward your monthly expenses. Besides income from employment, this income can include social security or other government help. It can include financial help from family members.

It's a good idea to leave some small credit cards out of your debt settlement. Keeping these cards current and paying them off whenever possible can help repair your credit. This is necessary after the negative impact on your credit score from the debt settlement. Your credit score is sometimes called your FICO score. Having these cards also gives you the safety of a fallback if an emergency expense arises.

Learn About the Costs to Settle Your Debts in Michigan

You'll incur costs as you move toward a debt settlement. Since you're falling farther behind on your debts, you'll incur late fees and other penalties. Your interest rates may increase. Of course, the goal of the debt settlement is to get the creditor to settle for much less than the debt before these costs occur. Remember that the creditor doesn't have to accept your settlement offer. Michigan debt settlement companies are in business to make a profit for themselves. Their fees are usually a percentage based on the total amount saved for you. This contingency fee makes sense because the more the debt settlement saves you, the more they earn. There are some companies that charge a percentage of your total debt. This is expensive for you and doesn't make sense. Avoid these fee agreements that aren’t based on what the company does for you.

Decide Whether to Work With a Michigan Debt Settlement Company

You don't have to hire a Michigan debt settlement company to settle your debts. This is something that you can do yourself. Negotiating your debt settlement yourself has several benefits. Some creditors won't work with a debt settlement company but will negotiate with their own customers. By doing the debt settlement yourself, you save the fees that you would've paid to the Michigan debt settlement company. Doing the work yourself allows you to have complete control over the process. You will never feel like you're out of the loop.  If you do the debt settlement yourself, make sure to get a written settlement agreement before sending money to the creditor. There are many reasons not to try a debt settlement on your own. You don't have the insider knowledge of what particular creditors will accept. You have no experience with debt negotiations. You have no one to seek guidance from when you're unsure about an issue. Debt settlements take a lot of time, hard work, and patience. Can you handle long waits on the phone? Can you negotiate with the necessary skill? Do you have a good idea of what the creditors will accept?

Research Michigan Debt Settlement Companies

Before signing up with a Michigan debt settlement company, the company must explain its fees and the conditions of its services to you. Debt settlement companies will often tell you to stop making payments to enhance their negotiating position with your creditors. The Michigan debt settlement company must tell you about the negative consequences of not paying the amounts due on the bills they will be negotiating for you. The negative consequences include late fees and other penalties, negative impacts on your credit score, collection calls from debt collectors, and potential collection lawsuits against you. Debt settlement companies will often hold your funds for you in an escrow account of sorts. The company uses these funds to pay creditors. The company must tell you that this money is still your money and that you're entitled to any interest earned on that money. An administrator that isn’t affiliated with the debt settlement firm administers the escrow account. The company must let you know that you're free to withdraw this money at any time without penalty.

The first place to look for information on companies you may retain is the Better Business Bureau where you can check the company's rating. This article from the State of Michigan is an excellent resource as well. Read this article before choosing a Michigan debt settlement company in Michigan; the advice is directly from the state government. The State recommends that you check this list to make sure a debt settlement company licensed to do business in Michigan. The article also recommends calling the Attorney General's Office for information about complaints about a company you're considering. The phone number for the consumer protection part of the attorney general's office is (517) 335-7632. It's important to know that the debt settlement company you're considering isn't a scam.

How to Make Your Debt Settlement Work

If you are making payments to build up a balance with a Michigan debt settlement company, make sure to set your due dates for these payments at a time of the month when you're not making other large payments. Stay on your budget. Make sure the budget sets aside money for expected expenses that happen less often than monthly. An example of such an expense would be your annual car registration expense. Make sure you're setting aside money for an emergency. If you're building up your escrow account with a date settlement company over thirty-six months, you can bet that you will have some kind of emergency expense over that time. Examples of emergency expenses are car repairs that weren't expected, or they could be something as simple as dropping your phone in the lake.

Alternatives to Debt Settlement

For many people, debt settlements are the best solution. For most people, there are better solutions than debt settlement. Debt settlements are best if you either have cash on hand or assets to sell to raise money to make large lump-sum payments to settle your debt. Since you're not paying your debts in full, a debt settlement will have a negative impact on your credit score. For this reason, debt settlements are best for you if you already have bad credit.