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Debt Settlement

Arizona has a 7.8% unemployment rate and had 27,298 new bankruptcy filings as of 2012. This does not even count the many who are working for less than they used to. The two things you need to be aware of regarding debt are that you are not alone and that it is important you not let embarrassment of your debt paralyze you into inaction. Taking action is vital. There are services and tools available to help you to manage your debt. Debt settlement is one such tool. Prior to considering this option, you need to understand what debt settlement is and how it works specific to Arizona.

What is Debt Settlement?

Debt Settlement involves negotiating with your creditors so that you settle the debt for less than the full amount owed. Typically this is done through a company that acts as an intermediary between you and your creditors for a fee. When using a debt settlement agency, the settlement involves you making payments to the agency which will then make payments to your creditors.

A Serious Decision

Debt Settlement should not be entered into without very careful consideration. If you are in debt to the point that you cannot make minimum payments to your creditors, your options may be limited. Even so, you need to understand some of the consequences of entering into a debt settlement agreement.

  • A debt settlement will negatively impact your credit score
  • Any amount of your debt that is forgiven may be considered by the IRS to be taxable income.

What You Need To Know

Arizona requires companies that offer Debt Settlement services to be appropriately licensed and comply with all state regulations. The specific regulations can be found on the Arizona State Legislature website under A.R.S. §§ 6-701 through 6-716.

Arizona Debt Settlement Fees

  • Must be clearly stated and agreed upon in advance.
  • $39 maximum for a retainer fee.
  • Monthly charge of $50 or 0.75% of the total indebtedness, whichever is less.
  • “Out of pocket” expenses may be charged with advance written approval by the debtor and superintendent.
  • Total debt must be calculated at least once per year, with appropriate adjustments to charges based on the new amount.
  • Mortgage or rent payments may not be counted as a debt for purposes of calculating fees.
  • The debt settlement company may not receive any fees until notice of the debt management contract has been given to all creditors listed on the application form.

Know Your Rights And Responsibilities

“Beware of false knowledge; it is more dangerous than ignorance.”
–George Bernard Shaw

Decisions affecting your finances can have serious and long term consequences for better or worse. Assume nothing. Know what the facts are so you can make the best decision for your financial well-being.

Seize the Day!

Doing nothing will not help you resolve the debt you are struggling with, it will only make it worse. This is not something that will just go away. You need to take the steps you need to take control of your debt. Learn your options and take action today.

Credit Counseling

The high average household credit card debt carried by Arizona residents places the state among the 10 most debt-ridden in the country. Averaging more than $12,000 in consumer credit card debt, citizens of the Grand Canyon State with high debt loads may want to consider credit counseling in order to help manage their financial obligations.

According to Assets & Opportunity Scorecard, the bankruptcy rate among Arizonans is some 25% higher than the national average, while the average annual pay rate trails the nation by about $3,500, and the student loan default rate is a whopping 70% higher than the rest of the country. Arizona residents spend more than most of the nation on the employee share of health insurance premiums paid as well as for out-of-pocket health expenses. Clearly, consumer economic pressure in Arizona has many faces and while the debt problem is daunting, it is not insurmountable.

Many debt-laden consumers in Arizona will benefit from the discipline, skills and credit knowledge offered by approved credit counselors.

Arizona's Rules

“Between car payments, getting married, buying property, having children, dealing with deaths, most people walk a very tight rope with debt,” said Howard Dvorkin, a CPA and author of Power Up: Taking Charge of Your Financial Destiny. “Once something goes wrong in their lives and they need money fast they are at a major loss and often turn to credit cards. Many people make the huge mistake of only making minimum payments.”

According to the Federal Trade Commission, “Reputable credit counseling organizations employ counselors who are certified and trained in consumer credit, money and debt management, and budgeting. Those organizations that are nonprofit have a legal obligation to provide education and counseling.”

Arizona licenses debt management companies and provides a list of active licensees on the Arizona Department of Financial Institutions website. Many agencies are headquartered in other states but are licensed to do business in Arizona.

Consumers seeking credit counseling will want to find an agency that provides a range of services including budget counseling, financial educational courses and personalized debt repayment plans, if necessary. Education and awareness may be enough to get some consumers back on track, but in some cases an agency may recommend and design a debt management plan in which the consumer makes one monthly payment to the agency and the agency disburses payments according to arrangements made with creditors.

Regardless of whether excessive debt arrived quickly or took years to accumulate, it will take time to pay it down, even with a payment plan. Creditors may agree to lower interest rates or waive certain fees if the consumer is working with a reputable program.

How To Find Help

One of the nation’s oldest consumer advocacy agencies is the National Foundation for Credit Counseling, formed in 1951 as a clearinghouse for information and today serves as a certifying agency with more than 700 member credit counseling agencies listed.

Another helpful index with specific advice on selecting a consumer credit counseling agency is found at USA.gov. Among other information, the site has recommendations on finding free or low-cost counseling.

Also, the U.S. Department of Justice (DOJ) provides a list of approved consumer credit counseling companies by state. While the list is intended for consumers who are required to have counseling as part of a bankruptcy filing, the DOJ-approved list can be a useful tool in finding a reputable company. Every DOJ-recommended agency in Arizona offers services in English as well as Spanish.