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For residents of Nevada, there are some specifics about debt settlement that you need to know.
What Is Debt Settlement?
Debt Settlement is 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 that then makes payments to your creditors.
Important Facts to Know
Debt Settlement requires serious consideration. 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 may increase your taxes (the amount of debt forgiven may be considered taxable income by the Internal Revenue Service); however, this option can be better than filing bankruptcy.
Nevada Regulates Companies that offer Debt Settlement services and provides protection to consumers. Nevada has enacted laws based on the Uniform Debt Management Services Act (UDMSA). This statute requires all companies offering debt settlement services to be registered with the state.
Nevada Regulates Debt Settlement Fees that can be charged based upon the type of agreement:
- If the individual agrees to a plan to reduce finance charges and fees, then the provider may charge a consultation fee that may not exceed $50.
- If the individual agrees to a plan where the creditors are expected to accept payment for less than the original debt, then the provider may charge up to 4 percent of the debt in the plan at inception or $400, whichever is less.
- Either agreement may charge a monthly fee that cannot be more than $10 times the number creditors in the plan at the time the fee is assessed, and cannot exceed $50 in any month.
Settlement and Savings Fees
Some plans have a settlement fee, which is a Flat Fee with a maximum of 17 percent of the individuals’ debt in the plan paid in equal installments over at half the contract period or more. The debt settlement company may also impose a Savings Fee. This fee is limited to no more than 30 percent of the individual’s savings at the time the settlement was initiated with a maximum of 20 percent of the enrolled debt.
Know Your Rights And Responsibilities
Make sure you get all the facts before making a decision. Each state has different rules. Know what the federal and state rules are and what the consequences will be of your actions.
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.
Seeking the advice of a Credit Counselor can provide the direction needed to save your home and help you get out of debt. The earlier in the stages of mortgage delinquency the better, as they will have considerably more options with which to work.
Bankruptcy Should Be The Last Resort
To combat this debt burden, Nevadans are preemptively seeking bankruptcy in large numbers rather than waiting for creditors to begin suing to recover credit card balances. Mary Ann Price, a spokeswoman for the Clark County Court system is reported by creditcards.com as saying “We’re so overwhelmed, we’re just trying to keep our heads above water.” Seems to be the pervasive sentiment in The Silver State as Nevada is third in the nation with 6.51 bankruptcy filings per 1,000 residents. But bankruptcy should be a last resort rather than the first choice. The Bankruptcy Reform Act of 2005 requires that debtors show a “documented and good faith effort to obtain and implement debt counseling.” In the process, debtors may find that credit counseling can offer them a good alternative to bankruptcy. One that enables them to resolve their debts and rebuilt credit much quicker than a bankruptcy would.
Nevada law requires that credit counselors not only register with the state as providing debt management plans and services, but to also re-register every year. They are required to carry a $250,000 insurance policy against fraud, dishonesty and theft as well as a security bond of $$50,000. The services they provide begin with a one-on-one meeting in which clients fully disclose their financial challenges and debt service. The credit counselor will tailor a plan for repayment and work directly with creditors to negotiate different terms that could include forgiveness of a portion of the debt.
Better Days Are Coming
The silver lining may seem obscure at the moment, but better days are coming. The unemployment rate is down from its high of 14 percent, home prices are beginning to edge up and tourism has increased year-over-year. And tourism means jobs. Debt counseling now could mean a better-prepared workforce as the economy warms up over the next several years.