There are several factors to consider when determining the order and priority of different debts to be settled.
The main ingredient to your success in debt negotiation is; money. How much you can bring to the table, and over what period of time, in order to fund offers to settle your credit card debt for less than the full balance. How much of this key ingredient you have on hand at critical moments of opportunity will be the main consideration for how you prioritize multiple debts that can be settled.
In answer to a reader question linked below, I stated it is best to fund the lowest percentage offers first. There is a bit more to it than that.
Settling debt with your original creditors such as Chase, Bank of America, Citi Bank, Wells Fargo etc… prior to charge off, will be your first optimal targets.
By settling with your creditors before charge off, you can avoid the accounts being placed in the collection pipeline that I discussed in a prior article: Collections and the A.S.S. principle. You will find that you often maximize savings in the debt settlement process by dealing with many of your accounts in the early stages of default while they are still held with the original creditor.
What each creditor will settle at prior to your accounts entering into second stage collections is often a moving target. How long you have had the account, if you have made recent balance transfers, recent cash advances or large purchases outside of normal spending habits, all can affect the balance reductions that will be approved (even whether balance reduction will be offered at all). Keeping up timely payments to other unsecured creditors, but not the account(s) you are trying to settle also may affect your reduced balance targets.
Consumers should look to any and all available cash flow resources in order to settle as much of the debts that are optimized for reduction as early as possible.
Settling Debts with Collection Agencies
While getting as much debt out of the way before accounts start to be placed with outside agencies is the first order of business with debt settlement, there are reasons to delay. With some of the issuers you may strategically delay settlements because the percentage of savings will be better with an agency. Also, there will likely be accounts that you simply cannot get to quick enough due to available cash flow and will have to settle with an agency later on, but at sometimes higher rates. This is part of the process and is unavoidable for many implementing a debt settlement approach to getting out of debt.
Settling Debt Placed with an Attorney Who May Sue you
Your primary goal with debt settlement will be to fund as many or all offers prior to an account being placed with an attorney who is authorized to sue you in order to collect.
You may have accounts with creditors who are known to use these types of collection attorneys more frequently and sooner than others. It will be an important part of your early strategy design to identify these accounts and where ever possible, make plans to mitigate your risks of being sued. Yes, there are methods to reduce these risks. Negotiating debts placed with attorney debt collection firms happens every day, but the percentage of balance reduction is generally not as favorable as it could have been had the account been settled earlier.
Intelligent Design to Settling Debt
Once you identify your specific accounts and balances and match them up with the current policy of each of your creditors, you are ready to set your targets and expectations for reduction and can start to map out a plan to fund settlements in the first stage of collection with available cash flow.
In second stage collection you will have to react to each agency and their policies that are handed to them by their boss, your creditors. You will need to be aware of collection tactics and the best timing to get as close to the lowest bar for settlement percentages available. Your percentage of savings targets in second stage collection will be a moving target based on calendar dates, policies, the agency it has been assigned to etc…
Following the design of a debt settlement plan sounds like a maze, but it isn’t. Not if you have access to all the details you will need to put the plan together and the ongoing assistance needed to navigate the often inevitable detours that happen along the way.
There are credible and reputable sources available to consumers that can assist in putting the design in place and help to implement it. The plan must be individualized. In all my years working with consumers I have yet to work with an identical file. Certain people’s situations may rhyme, but each is unique and different. Individualizing a plan will optimize your results. Look for sources like CRN that recognize this.
If you have a debt question of your own, click the following link, submit your question and provide a little background about your situation and get answers from an expert: ASK CRN
Are ‘good people’ all poor? Many people think that’s true. In fact, in many faiths turning away from money and material things is considered virtuous. Many even commit themselves to a life of poverty.
Maybe it’s not quite that simple. What if money were just a tool. You wouldn’t say someone was bad because they had a full toolbox.
Let’s say that money is just a tool to help us trade one thing for another. In fact, that’s what economists would tell you. By itself money has no value. It’s not necessarily good or bad. It’s what people do with money that is good or bad. So the problem is with the way money is used. Not the money itself.
One of the most misquoted verses in the Bible is that “For the love of money is a root of all kinds of evil” (1 Tim 6:10). It’s the love that causes the problem. When you place your affection on money you become vulnerable to troubles. The mere fact that you have accumulated some wealth does not make you bad.
So what does this have to do with achieving Financial Independence? Good question! Actually, quite a bit.
First, to be financially independent means being in control of our money. Not to have our money control us. So we need to be careful not to fall in love with our money. If we do, we’ll begin to let money have too much influence over us. Just another way of saying money is in control.
Secondly, a belief that money is bad could be sabotaging your desire to build wealth. If subconsciously we believe that all money is evil, then we’ll push it away from us. We’ll find it hard to do the things necessary to build a savings account or IRA. I’ve even heard people say that they have a way of ‘repelling money’ or that they’re ‘alergic to money’. We can’t see our subconscious, but it has a large impact on what we do and say. Sometimes it even ruins our own plans.
So what do you think about money? Do you have a good relationship with it? Or is it time to reconsider what you believe?
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Gary Foreman is the editor of www.stretcher.com. The Dollar Stretcher.com is a website devoted to helping people “live better…for less”. If you’re struggling with debt visit their Debt Situation Critical page.
How to Get Out of a Debt Relief Program and Get a Refund
The following is posted with permission from the author. It is word for word what can be found on Steve Rhode’s site: Getoutofdebt.org.
This post is timely for consumers who enrolled in a program to negotiate debt only to later learn the program did not live up to the hype.
If you are in the unfortunate position to have learned you were not well suited to attempt debt settlement as a means to avoid bankruptcy, following the steps outlined in this post may be your best option to reverse at least some of the damage done.
Readers are welcome to give feedback on their circumstance and progress in the comment section below or you can ask questions and get answers from a debt expert by clicking here: ASK CRN.
Steve’s Guide:
Here is my definitive guide on how to get out of a debt relief program. Warning, it will take some work, but it can be effective.
I’m going to break this process down in stages. It’s important for you to keep tabs on the items in these stages so get a shoebox, folder or just a special drawer to throw all the documentation in as it comes in or you gather it.
I’m starting with the premise that you are in a debt relief program and want out and have received little to no benefit from the program.
The postcard you get back will show the name of the company you sent it to, a signature of who signed for it and when they got it.
Explain in your letter that you are unhappy with their services, tell them why, and say you want out of their program and expect a refund paid by X date. Give them at least two weeks from the day you send your letter.
In the letter let them know that if they do not issue you a full refund you plan to file a complaint with the following people:
Your State Attorney General’s office. For a listing, click here.
The Attorney General’s office where the debt settlement company is located.
Your local Better Business Bureau. You can file a complaint online here.
Any local consumer affairs office your local county government might have. To see if you have a local office, click here.
The Federal Trade Commission. You can file a complaint online here.
Any association the company may belong to.
You local television station which does consumer investigations.
If the debt relief company is a law firm or run by a lawyer, file a complaint with the Bar Association in your state and their state. For a listing of state bar association links, click here.
If your money is being deposited in a third-party escrow account with separate escrow provider, send a copy of your complaint to them. They may be able to help apply some pressure with the debt settlement company and don’t want to work with debt settlement companies that may be harming consumers.
If you are not satisfied with the response from escrow service provider you can file a complaint with the FDIC against their underlying banks. Click here.
Any communications you receive from this point forward, put in your special place. If you get emails, print them out. If they call you, keep a written log when they called, who you spoke with, and what the conversation was about.
Put a copy of your letter and the certified mail receipt from the post office in your special place.
Once the debt relief company receives your letter and signs for it you will get the return receipt card back in the mail. Put that card in your special place.
Contact your bank and find out what you need to do to stop any additional debits by the debt settlement company from your account. The bank may tell you you will have to change your checking account number. Yes, that’s a pain in the ass but it will absolutely prevent future debits.
If your money is being deposited into a third-party escrow account contact the escrow company, tell them you want a full refund of the money in your account and you want to close your account.
If you sent your request by mail, put a copy of your letter and the certified mail receipt from the post office in your special place.
If the debt relief company does not contact or respond to you by the date you specified in the letter, do what you said you would do and file the complaints.
If the debt relief company does respond and makes you a partial refund offer that is acceptable to you, accept the offer but make sure the offer does not come with a requirement for you to waive any of your rights.
Some companies want people to sign statements they will not speak out against the company or waive any further claim against the company. If the company has harmed you that seems like an unreasonable thing for you to waive. However only you can decide what is best for you to do when presented with an offer. If you unsure what rights you may waive then find a local attorney licensed in your state for help.
If the offer is not acceptable or the company does not respond then file a complaint with the people I mentioned above. If sending your complaint by mail, include copies of your original letter and and the return receipt card showing the company received it. Send these complaints by mail using certified mail, return receipt requested.
Put a copy of all your complaints and proof you mailed them in your special place.
Send the debt relief company copies of the complaints you send to others as you send them. Send them to the debt settlement company by certified mail, return receipt requested.
Put all return receipt cards you get back in your special place.
If you file your complaint online and get an email or some other proof that you submitted a complaint, print that out and put it in your special place.
Once you file complaints with the folks I listed above, you may notice the debt settlement company is much more willing to refund your money and put this matter behind them. They want to avoid irritating state regulators, damaging their BBB reputation, and becoming the subject of an FTC investigation.
If you file a complaint with the people above, it may or may not result in a refund to you but it will put the company on their radar for future enforcement activity against them.
If you still have not received a fair and reasonable refund then contact your local court and find out how to sue the debt relief company in small claims court for your refund. Typically the amounts claimed are eligible to be pursued by individuals this way. And if you go this route all those documents you’ve place in your special place will come in very handy, Take them all with you when you go for your court date.
If you have left the debt relief program, remember to still take care of your debt. You can click here to find a local bankruptcy attorney, seek information about credit counseling, or seek out a performance fee based debt settlement company. Regardless of which avenue you choose, just do something. Doing nothing is not a viable option.
If you have paid thousands of dollars to the debt relief company you are claiming has not helped you, while the process above is a bit time consuming and involves some cost, it will be a worthwhile attempt to get a refund.
Most people that follow this process should expect to get a reasonable refund or an entire refund of the fees paid if you file your request before the company files for bankruptcy.
Over the years of providing debt relief related products and services, I have been hyper critical of companies operating in my industry. My criticism can be found in public commentary with regulatory agencies, main stream media articles, radio appearances, and on this very blog.
Why the criticism?
I find most companies offering debt relief, most specifically debt settlement, to have and to continue to use; Business practices that are harmful to the consumer and the negotiation effort itself.
It is indeed rare that I can point to a company and hold them, or a specific practice they have, in a good light.
This post is one of those rarities.
A few weeks ago, I came across a press release that caught my attention. It was a debt settlement service provider openly and publicly discussing their refund policy. I was surprised by this type of business practice being self published. It is extremely rare for a company in my industry to issue an unprompted press release on the topic of refunds. Most companies, often enough, do not even provide refunds, let alone issue them as fairly as the one published in this press release: OVLG – Money back policy for consumers – how to maintain corporate social responsibility.
With little effort, I was able to research further into this company and find additional surprises. One of which is their fee model. They have up to now, been charging one of the fairest fees for services I have seen in my industry. They charge a small retainer, with the bulk of their fee being collected after a settlement is reached with a client’s creditor. Up to now, I had known only a handful of companies operating with a success fee. With the enactment of new telemarketing rules by the Federal Trade Commission, the majority of service providers will now be charging fees only after they get results (a welcome and necessary rule).
I was also able to communicate with the head of the firm and learn more of what drives this company from the top down. I have found that the few “stand out” and recommendable companies in my industry (that I am aware of), share some core similarities. One of these similarities is: The attitude and principled nature of owners and management, which shows through to their employees and support staff, which in turn lead to how they manage and fulfill their commitment to their customers. In my research and communication with the people at Oak View Law Group, I see an example of principles and fairness that many in the debt relief space (or any industry) should look to emulate.
Recent regulatory changes are creating a climate that will lead many existing debt relief companies to change how they do business, or close up shop. Many remaining companies will down size and cut costs. Not only will OVLG still be here when the dust clears, but I have learned of enhancements that they have put in place to create even more value for their clients.
While OVLG could be considered a competitor to my company, I don’t see it that way. Most anyone would recognize the differences between OVLG and CRN when comparing the two. I believe there is ample room for reputable firms to do business in this industry. Its high time good companies started recognizing one another.
Several months ago, I set out to begin to identify debt settlement companies that would be able to adapt to the new operational realities and who would be here next year, and for years to come. I was able to identify a handful. I will endeavor to highlight them, in no particular order, in coming blog posts.
“My Debt Specialist was totally professional and he had my confidence from the beginning. I was impressed with the fact that he took the time to familiarize himself with my personal and financial situation long before he began to talk about CRN. He patiently answered all of my questions on numerous occasions, was responsive to my calls and emails. And there was no pressure to sign with CRN. CRN has made settling my 42K about as pleasant and stress-free experience as one could ever ask for. Without hesitation, I would recommend CRN to anyone.”
“When I first signed up for the program I received the cds and printed material and studied them and they were a great help and reassurance, but as you get into the process you end up with so many questions and concerns that nothing takes the place of that live voice on the phone or an email. The help of the specialist I worked with was critical to my success...with the help of my specialist I have settled 4 accounts of nearly $40,000. I don't know what I would have done without the specialist's help.”
