How to Settle Your Debts in West Virginia

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!