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1. What is the difference between debt consolidation and debt settlement? |
| Debt consolidation is simply putting all your debt on one tab; you are not decreasing your debt, but simply making payments to one bank. Debt settlement allows you to decrease your debt, although it is not bankruptcy. While this may sound good on the surface, debt settlement can have an adverse affect on your credit score if you have excellent credit and have not missed any payments. But, debt settlement will help your debt to income ratio. | |
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2. What exactly is the difference between debt settlement and bankruptcy? |
| Debt settlement is acknowledging that you owe money and paying back some of it. Bankruptcy is saying you cannot pay back any of your debt. While it may sound easy, filing for bankruptcy has lasting effects. It can stay on one’s credit for up to ten years, which makes it difficult to get credit or buy a home or car in that time. | |
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3. How should I handle creditors if I know I cannot pay my bills? |
| Contact them, explain the situation, tell them you want to make good on the outstanding loans and ask if you can send partial payments. By taking responsibility for your debt and taking action before you miss payments, your creditors will be much more understanding and willing to work out alternative payment options with you. NEVER assume they won’t notice late or non-payments; they ALWAYS do. However, creditors are more demanding when you make no effort to resolve the situation. | |
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4. Will seeking debt counseling hurt my credit? |
| No. Debt counselors will advise you of your options, including those which can have adverse affects on your credit (debt settlement, bankruptcy), but simply speaking with someone about your debt will not hurt your credit. | |
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5. Why should I review my credit report? |
| Review your credit report to make sure all the information is correct. Check for old accounts that are still open and for occasions when a creditor reported you for paying late or not at all. Once you know what lenders see, you can start taking steps to fix your individual credit. | |
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6. Do I have to provide my social security number so a lender can run a credit check? |
| No. A credit check can be run using your street address and full name, however the lender may be unwilling to accept your application or to grant credit without you revealing your Social Security number. | |
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7. What do I do to stop harassing phone calls from creditors? | ||||||||||||||||||||||||||||||||||||||||||||||||
| If you are being harassed by particular creditors, you
can stop it by hanging up on them and sending a certified letter,
telling them to cease telephone communication. You can also report
harassing or abusive creditors to the Federal Trade Commission, which
enforces the Fair Collections laws. Finally, you should seek the advice
and assistance of competent legal counsel if the harassment continues.
If you or your legal counsel believes a lawsuit may be in order, you
will need to provide evidence of the harassment. You should keep copies
of any letters or e-mails sent to you from a creditor. You should
record your conversations with the Creditor whenever possible and
permitted by law. Check with your legal counsel before starting any
recording campaign. The following is a list of states that generally permit you to tape record telephone conversations with creditors without their permission:
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8. What if the creditor threatens to sue me? |
| By applying for, accepting and using a credit line, you signed a legally binding agreement to repay any amount loaned to you. A creditor has the legal right to take you to court to collect the debt if necessary. If a creditor threatens you with litigation you should contact your legal counsel for advice. While these threats may be nothing more than the creditor’s attempt to pressure you into paying off the debt, they should nevertheless be taken seriously and not simply ignored. | |
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9. What are the top priorities if I have to decide which bills I’m going to pay this month? |
| If you cannot pay all of your debt as you have agreed, you need to decide who you are going to pay and who you are going to defer. Only you can decide which of your debts is more important to you than another. On average though, most people prioritize debt importance in this order: family needs (groceries, medical), housing (rent, mortgage) and utilities (water, electric). If you are in such a situation and need help prioritizing your debts, you should seek debt counseling as soon as possible. | |
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10. I received an official looking notice from one of my creditors but have since found out that it isn’t a legal document. Can creditors do this? |
| No. Creditors cannot use false pretenses to get your attention or lie to intimidate you into paying a debt. | |
