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Debt Settlement is the process of negotiating with creditors to settle debts for less than the full amount owed. This is usually done through an intermediary who will charge a fee for this service. When using a debt settlement agency, payments are made to that agency who, in turn, makes payments to your creditors.
Important Facts About Debt Settlement
Debt Settlement should not be entered into without serious consideration. However, if you cannot make your minimum payments to your creditors, this may be your only option. Entering into a Debt Settlement will negatively impact your credit score and any amount of your debt that is forgiven is considered by the IRS to be taxable income. However, this option can be a better option than filing bankruptcy, and while your credit score is impacted, the effect is generally less than if bankruptcy was chosen.
Know Colorado's Rules
Colorado Regulates companies that offer Debt Settlement services and provides protection to consumers. Colorado’s Information for Consumers provides helpful information about debt management services available to residents, as well as questions to ask when choosing one.
Registered Debt Settlement Providers – The Colorado Attorney General provides a list of registered Debt Settlement providers as well as any disciplinary action taken against that provider. It is important to choose appropriately registered providers who conduct business well.
Considering Debt Settlement?
Review all of your options before making a decision. This financial decision can affect your credit for years. Consulting a Credit Counselor first may be a benefit and some companies provide both Credit Counseling and Debt Settlement services.
Know your rights. Be sure to understand your rights and responsibilities. Beware of any company offering guarantees regarding settlements – creditors are not required to enter into a debt settlement agreement.
Make a Decision. Review the list of registered providers and then shop around. Look out for companies that want high fees up front or make promises that seem too good to be true. Complete the form at the top of this page for a free consultation.
Take Action - If your personal debt is at a point where minimum payments cannot be made, it’s time to act and get professional help to help you navigate your way back to financial well-being. Whether through debt settlement, debt consolidation or credit counseling, it’s important to take that first step.
Various factors contribute to the personal debt faced by residents of Colorado. Accessing home equity lines of credit, especially during the housing boom, led to many mortgages being underwater. Using personal lines of credit in times of financial distress is another. Even though Colorado’s unemployment rate is 6.9 percent and declining, many in the state continue to remain underemployed while many others continue to struggle with their debt.
What You Need to Know
Inform yourself so you can determine your needs and make the best decisions. Here are a few points to consider:
Credit Counseling Expectations – Working with a Credit Counselor means accepting guidance from an expert. The counselor will help you assess where you are financially and help you set realistic goals. They will work with you to develop a plan to achieve those goals. Credit counseling may only involve budgeting and other financial advice; however, many times the counselor negotiates a debt repayment plan as well. Different organizations offer different services, so it’s up to you to determine what service best suits your needs.
Finding an Approved Credit Counselor – Unlike many states, Colorado has no regulations specifically written to regulate credit counselors or credit counseling agencies. However, residents will need to find an approved credit counselor if the resident wants to meet the personal bankruptcy requirement.
Credit Counseling and Bankruptcy – According to the US Bankruptcy Court District of Colorado residents must attend credit counseling within 180 days of filing for bankruptcy or their request will be denied. This credit counseling must be from the approved list.
While credit counseling is a requirement for a bankruptcy to proceed, seeking help before debt is out-of-control can help prevent bankruptcy.
Debt and Shame – There are many stories in the news and online about people experiencing shame because they are in debt. Sometimes this can have a paralyzing effect resulting in a lack of action. Taking no action when facing growing debt is one of the worst things that you can do. The sooner you act the better your chances of minimizing further damage and having a positive end result.
Tough Questions to Ask
Am I controlling my debt or is it controlling me? Can I benefit from credit counseling? What are my needs? Which organization should I choose? Whichever you choose to do, it is important to ask yourself these questions and then take action. You can start now with a free consultation by filling out the form on this page.