How to Settle Your Debts in Pennsylvania

Collect The Details About Your Debts 

To begin the debt settlement process, collect your most recent statements from each account. Gather information about debts you are not looking to settle (as well as the ones that you are looking to settle) so that you can give your credit counselor, creditors, and debt settlement company a full picture of your finances. If your bills are all over the place and you have been throwing everything out, pull a free credit report online from the credit bureaus to evaluate your debt-related information in one place. You may also benefit from pulling your credit report to see who “owns” your debts if any of them have been sold to collection agencies already.

Collect Details About Your Ability to Settle Your Debts

A Pennsylvania debt settlement company will negotiate different settlements with all of the unsecured creditors you hope to settle with. Usually, a debt settlement company will have you begin making payments to an escrow account in advance of your settlement offer negotiations. When you have enough money in your account, they will use that money to pay settlements to your creditors. Some creditors may allow you to make your payment in installments directly, but installment payments are usually not as good settlements as lump-sum payments for the purpose of minimizing risk, so most creditors don’t accept installment arrangements as part of settlement negotiations.

The only way a debt settlement program will work is if you have the funds available to settle your debts. If you don’t have assets immediately available and you’re not planning on selling property to fund your settlement offers, you will need to go through your monthly income and create a budget for yourself to see how much you can save over a few months’ time to offer to your creditors. To make your budget you will need to include all sources of income. Ensure that your sources of income are steady so that you know how much you can pay towards your settlements. Consider all of your regular expenses and set aside extra money for emergency funds. People often fail to put money aside and end up worse off than they were before they started. 

Learn About The Costs to Settle Your Debts In Pennsylvania 

If you decide to hire a Pennsylvania debt settlement company to help you negotiate your debts, then you will need to be aware of these costs: 

• High fees paid for their service

• Bank fees associated with a third party account (If a debt settlement company requires you to deposit your monthly payments into a third party account, you may be charged for using this account)

Before signing up with any company, it is vital that you inquire how the company plans to charge you. Debt settlement companies take their fees either by charging you a percentage based on the total debt or by charging you a percentage based on the total savings. Always sign up with a company that will provide you with the second option as it is cheaper and provides an incentive for debt settlement companies to get you a better settlement than they otherwise might. 

Decide Whether to Work with a Pennsylvania Debt Settlement Company

You don’t need to hire a  Pennsylvania debt settlement company to help you negotiate your debts. If you’d like to, you can negotiate with your creditors directly. One advantage of DIY debt negotiation is that if a debt collector is not willing to work with a third party, you will be able to work with them directly. Taking the initiative to settle the debt yourself can be a good way to stay in control of your finances and save on fees. However, settlement negotiation is time-consuming so you will need to be able to stay organized and keep good notes. Hiring a Pennsylvania debt settlement company may be a better option if you won’t be able to set aside any time to call your creditors due to your busy schedule. 

Research Pennsylvania Debt Settlement Companies

Make a list of different debt settlement companies that you may want to hire to help you settle your debt. You should also jot down a list of questions to ask your top Pennsylvania debt settlement company candidate before hiring them. Below are questions you should ask as you interview different companies: 

• What are the price and terms of the services I will be getting?

• How long it will take to get results? 

• How will my credit be affected if I stop paying your creditors?

If you’re not already behind on your payments, a company will probably instruct you to stop making any monthly payments to your creditors so that your account becomes delinquent, as creditors won’t agree to settlements with account holders whose payments are current. It’s important to note that once your account is in default long enough, you will be charged late fees and penalties that are irreversible. While your account is not being paid your credit score will also take a hit. Not all banks will work with a Pennsylvania debt settlement company.  Ask your creditor whether they will work with a Pennsylvania debt settlement company before signing up. 

There are numerous scams out there. Look out for these signs before signing up with any debt settlement company: 

• They promise you the world to get you to sign up without reviewing your specific situation. 

• They are aggressive with you to have you sign up. 

• They tell you that bankruptcy is not a good option for you and/or they tell you that bankruptcy will ruin your credit forever. 

You should check Pennsylvania’s attorney general website, to see if any complaints have been filed against the company you are considering hiring. Additionally, checking with the Better Business Bureau is a good place to see reviews from past clients. 

How to Make Your Debt Settlement Work

Once you have reviewed your budget and expenses and determined you have enough money to pay back your creditors, you will need to consider when you will be able to make the payments to your creditors. To ensure your Pennsylvania debt settlement works, make sure that your settlement payments are taken out of your bank account on a day you are able to make a payment. It is probably not a good idea to have your mortgage payment and debt settlement payment due on the same day. If you’re making a lump sum payment, take care to schedule that payment on a date when the funds will be readily available as well.  

Alternatives to Debt Settlement

Remember that debt settlement programs are not suitable for everyone and that’s okay. Even if you decide to begin with a debt settlement program, your circumstances may change and you may have to find another debt management option that works better for your circumstances. Below, you’ll learn about some of the most popular debt management options worthy of your consideration.