How to Settle Your Debts in North Carolina

Collect the Details About Your Debts 

In order to better ensure that your debt settlement plan is ultimately successful, it’s necessary to gather certain information before you begin. If you decide to take advantage of a free credit counseling session, your counselor will provide advice and recommendations based on this information. As such, the more details you provide, the better equipped your counselor will be to provide appropriate recommendations personalized for your situation. 

Important documents to gather include bank, loan, and credit card statements as these will outline monthly payments and interest rates, outstanding balances, secured v. unsecured debt designations, and other relevant details about your accounts. You should also request a free copy of your credit report, which will provide creditor contact information and details about all of the debts that you owe that have been reported to the three major credit bureaus. In the event that any of your debts have been sold to collectors, you’ll be able to learn about who has purchased your debt. You’ll need to deal with these debt collectors during negotiations as they now “own” your debt.

Collect Details About Your Ability to Settle Your Debts

To determine whether debt settlement may be a viable option for you, begin by collecting information about your monthly income, expenses, and debts. Calculating your income and expenses will be important if you don’t have immediate access to enough money (or property to sell) to fund your settlement offers. By looking at your monthly budget, you’ll be able to tell whether you have enough disposable income left over after you’ve covered your expenses to make monthly installment payments until you can fund settlement offers after 2 or 3 installments have either been set aside or placed in an escrow account by a debt settlement company. Some creditors will accept 2-3 installment payments directly, but most prefer a single lump sum settlement offer because that approach decreases the likelihood of further default. 

Once you have figured out your monthly income, you’ll need to determine your monthly expenses, both fixed and variable. Fixed expenses are those that change very little, or not at all, from month to month. These include car payments, rent or mortgage, and health insurance. Variable expenses can vary widely from month to month. These include expenses for entertainment, groceries, and gas. 

If you subtract the full amount of your monthly expenses from your income, what you have left is referred to as disposable income. This is the amount that can be designated for debt settlement payments, or an upfront, lump sum payment. If your disposable income is extremely low, or non-existent, debt settlement may not be a good fit for you. In this case, Chapter 7 bankruptcy might be your best option. If, however, there is enough left to settle your debts within a two to three-month period, debt settlement may work. Alternatively, if you have some disposable income left over but not enough to fund settlement offers, you may want to ask your credit counselor about entering into a debt management plan. 

Keep in mind that credit cards with small balances should not be included in a debt settlement plan, as it is usually more cost effective to pay them off separately. And retirement funds should never be used to settle debts. For starters, you will likely incur IRS tax consequences, such as hefty fees and penalties for early withdrawals. Even worse, you can seriously jeopardize your financial future by draining your retirement accounts before retirement age.

Learn About the Costs to Settle Your Debts in North Carolina 

Just as there are costs involved with falling behind on debt payments, there are costs to settle them. If you choose to work with a North Carolina debt settlement company, you will need to pay fees. These are usually charged in one of two ways—a percentage of your total debt amount or total savings. The latter option is preferable, as it gives the debt settlement company a significant incentive to get you a great deal.  

Keep in mind that the longer it takes you (or a debt settlement company) to resolve your overdue debts, the more fees and penalties will accrue. Creditors generally won’t agree to settle accounts that are fewer than 90 days past due, so in this way, debt settlement comes with costs no matter how you approach the process. 

Decide Whether to Work with a North Carolina Debt Settlement Company

You can settle debts on your own, which will save you a significant amount of money in debt settlement company fees. However, this DIY method is not a good idea for everyone. In some cases, you may simply be uncomfortable negotiating with creditors on your own. In other cases, you may have too little time and too many alternative responsibilities to make self-directed debt settlement a navigable process. Pursuing this process on your own takes a great deal of time, effort, and organization. 

But for some people, going it alone is the absolute best route. For starters, certain creditors won’t agree to work with a debt settlement company. For these creditors, self-directed settlement may be your only option. The other benefits to doing it yourself include being able to remain in control the entire time, and cost savings. 

On the other hand, working with a New Jersey debt settlement company means you will no longer have to deal with creditors, and you have a better chance of the lowest settlement possible, as debt settlement companies are skilled at negotiating low amounts. As a result, there is no one “right” way to approach debt settlement. Choose whichever approach makes the most sense for your unique circumstances. 

Research North Carolina Debt Settlement Companies

If you don’t want to take a DIY approach, don’t choose to work with the first North Carolina debt settlement company you find via a Google search as a matter of course. Do your homework. Although there are a plethora of reputable companies available for you to work with, there are also plenty that engage in bad business practices, and some are outright scams. To determine if the company you are considering is legit, visit the North Carolina Attorney General’s website and the Better Business Bureau website to see if any complaints have been filed against that enterprise. You may also want to ask your credit counselor if they are aware of any trustworthy debt settlement companies operating in your area. 

How to Make Your Debt Settlement Work

If you decide to go pursue debt settlement, improve your chances of successfully completing your program by considering the following tips:

• Work with a credit counselor to determine whether your situation is a good candidate for debt settlement. 

• Choose a monthly payment or lump settlement that you can afford. 

• Choose a due date that works for you. Avoid having debt settlement payments coincide with rent or mortgage payments, for example. 

• Stick to your scheduled payment date, and make extra payments whenever possible. 

• Close out other credit cards. Leaving cards with zero or low balances open can negatively impact your ability to get settlement offers. 

Alternatives to Debt Settlement

Deciding that debt settlement is not right for you does not mean that you have run out of options. There are multiple alternatives to debt settlement available, each with its own set of advantages and disadvantages. The information below will introduce you to these other forms of debt relief, and help you determine whether they might be a good fit for your unique situation. Even after you have reviewed this information, it is in your best interest to meet with a credit counselor who can help to ensure that you’re choosing the best debt management solution for you.