Debt Settlement in New Jersey
Debt can be a difficult problem to deal with. And, with the recent economic troubles, getting rid of the debt can be even more difficult. According to a Federal Reserve report on household credit for the second quarter of 2013, almost 9% of outstanding balances in New Jersey are more than 90 days late.
That's a fairly high percentage of people having trouble paying their bills. For those who are drowning in debt, one option is debt settlement. With debt settlement, New Jersey residents have the chance to reduce what they owe and get out from under debt.
Who Can Benefit From Debt Settlement?
Debt settlement works best if you have unsecured debt. This is debt (like credit card debt) that doesn't have collateral attached. A mortgage is secured by a home, and an auto loan is secured by a car. If you default on these types of loans, the lender can repossess your property. With unsecured debt, the ability to take your property is very limited.
Those who have at least $7,500 in unsecured debt, and who have trouble making minimum payments, can potentially benefit from debt settlement. The entire premise of debt settlement is based on the consumer's inability to pay the debt in full.
How Debt Settlement Works
Debt settlement works by requiring you to stop making your payments to your creditors. Instead of making your payments, you negotiate a lower lump sum payment. Often, you can settle for between 40 and 80 cents for each dollar that you owe. If your creditors feel that you won't be able to pay the debt, they are more willing to accept a smaller amount so that they can get something.
In New Jersey, many consumers find it helpful to work with a licensed "debt adjuster" or attorney who can represent them. Instead of paying monthly credit bills, you set money aside in an account. The money accrues until a credit accepts a settlement offer. Then the money in the account can be used to discharge the debt.
While you can settle your debts on your own, it can be an overwhelming process. The help of a knowledgeable and reputable third-party can manage the situation, and offer proper incentive to creditors so that they accept your settlement.
Carefully consider your options, however. In New Jersey, a special license is required to become a "debt adjustor." Many of the for-profit companies that run debt settlement programs from out of state are not properly licensed in New Jersey. There are some exceptions to the debt adjuster rule, but it's best to start with the approved New Jersey debt adjusters, or speak with an attorney who can help you.
Risks of Debt Settlement
It's important to understand the risks associated with debt settlement. Since you will stop your credit payments, your credit score will suffer. Additionally, a debt listed as "settled" on your credit report has a greater negative impact than a debt that you pay off in full. Finally, there is always the risk that the creditor will decide to sue you for nonpayment of the debt, rather than settle with you.
Once you understand these risks, you can proceed with your debt settlement.