Do you fall into one of these categories:
You are making your monthly payments each month and contributing a little extra on top of your monthly minimums; thus paying down your debt a steadily, only you've done the math and it will take you around 18 years.
You are making your monthly payments each month but only the minimum payments and not making any progress on the principal; you feel that at any moment if something were to happen to you, for instance you lose your job, then all your obligations will spiral out of control.
Your debt is overwhelming but you think you've got a handle on your debt by borrowing from family and friends, transferring balances whenever a low interest offer comes in the mail, and robbing Peter to pay Paul whenever there's an opportunity to do so. You believe this is your answer to "managing" your debt.
You are thinking that bankruptcy is your only option. Please don't do this! Bankruptcy should not be used until after all options have been explored and exhausted.
If any of the above sounds like you, then read on and this article may prove useful after all.
Credit card debt is scary; and with stagnant wages, a deflating housing market, adjustable (ARM) loans coming due, credit cards companies spiking interest rates as high as 30% and tacking on unnecessary fees - it's not a matter of if the bottom will fall out, it's a question of when. The good news is that although limited, there are options. The option that you will learn and presented in this manual is in our opinion the most effective and quickest way out of debt, aside from a Chapter 7 Bankruptcy - it's known as Debt Negotiation or Debt Settlement.
What we are talking about here is simply bartering. We've all done this before - whether it's buying a vehicle, a home, or a t-shirt in Cancun; the principal is the same. Except we're not negotiating the interest rate to a lower rate nor the monthly services charges down a minimal fee, we are negotiating the entire balance of your credit card debt. The goal will be to reduce your debt to around 50%, maybe even less:
12.5 Steps to Get Out Of Debt by Way of Settlement
Step 1: Understand your risks and realities of overdue debt. Can you get sued? Yes. Can a creditor garnish your wages? Yes. The possibilities do exist but the chances are small. The reality is that it is simply too much time and too much of an expense on the creditor's part to take action against you.
Step 2: Gather all your bills and calculate the total debt that you want to settle.
Step 3: Know which debts are good candidates for settlements. Secured debts cannot be settled (home or auto); unsecured debts has nothing attached to the loan or debt and can be included.
Step 4: Know your creditor umbrellas. For instance if you want to include a MBNA credit card or a FIA credit card in your settlements - you need to know that these are owned by Bank of America. And if you have a Bank of America bank account, your money and savings could be affected. There is a clause in the contract when you opened up your bank account called the Right of Offset. To put it simply, Bank of America can reach into your account at any time and collect on their funds, interest, or late fees. In this case if you wanted to include those two credit cards, you will want to either close or minimize your BOA account and start banking elsewhere.
Step 5: Remember a creditor will only settle if you are delinquent on an account. If you continue to make minimum payments or a bit more to chip at your debt, you have no leverage and the creditor has no reason to settle. Minimum payments = profits! (If you owe $30,000, you could end up paying back $102,000 just by paying the minimum payments only).
Step 6: Once you fall delinquent and behind on your debts - brace yourself for a flurry of harassing phone calls and nasty letters to your home and work. Remember when you filled out your application and had to fill out several references? Know that these references will be contacted as well. Don't cave in or panic. Keep a cool and level head. Unless you are a professional arbitrator, don't talk to them on the phone, correspond via letters and be sure to keep all paper trails.
Step 7: Find out if your account is still with the original creditor. You will have to do some leg work on this. Call your original creditor. If the account is still with them, they will start dealing with you. Otherwise your account is with a collection agency and they will either refer you to them or not; more than likely they won't refer you to them and you will simply have to wait until that collection company calls you.
Collection companies are companies that buy bad debts on pennies on the dollar for the debt that they are trying to collect.
There are also law firms that pose as collection companies. Correspondence received from these companies can be very intimidating but if they are - remember 99% of the time they're simply empty threats.
Step 8: Start Haggling. Keep in mind that the collection company will take less money than they initially ask. Timing is also everything. Factors to consider: Delinquency of your debt, Time of the Month, Time of the Year, and more importantly who the creditor is. Each creditor has their threshold as to how log they can negotiate; and knowing these thresholds are key.
Step 9: Once you and the creditor agree on a settlement offer, remember they will want their money right away - usually within 48-72 hours. So if you have a $1000 credit card and you negotiate it down to $600, make sure that you have that $600 on you to pay them immediately.
Step 10: Get your terms in writing before paying. This is important! Never expect a creditor that has made an agreement verbally. And even though it is in writing you'll still have to fight to keep the creditor at their word.
Step 11: Negotiate your credit rating with the creditor. Understand that by way of settlement, your credit rating will be negatively affected. Be sure that once you have paid a settlement, that the creditor reports this to your credit report.
Step 12: First the good news - you are debt free! The bad news is that your credit rating has taken a hit. Just remember time heals all wounds and will restore your credit rating. You can also seek the help of a credit repair company to speed up the credit rebuilding process and get you back on track.
Step 12 ½: It's CELEBRATION TIME! If you drink, then bottoms up. If you celebrate by going out to eat, then treat you and your loved ones to a steak and lobster dinner. Whatever your vice is, you deserve a pat on the back! You have just saved yourself years upon years of pain and thousands upon thousands of dollars of your hard-earned money that would have otherwise gone towards ridiculous fees and interest.
At this point you might wonder why some people would choose to work with specialists like RAM Financial Services rather than do this on their own. The simplest answer is to answer that question with another question: Why do people hire real estate agents to sell their home? Why do most people depend on investment bankers to invest their money?
Simply put:
They're professionals. They do their line of work all day everyday on a full time basis and have the working relationships to get the job done effortlessly and to maximum potential.
I wish you the best of luck in all your haggling endeavors and if you have questions whatsoever please feel free to contact us at any time.
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