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Debt Settlement

While debt can be a difficult issue — and the reasons for it many — it's not an unsolvable problem. Debt settlement can provide one way out of it. If you live in Utah, the following information can help you to determine whether debt settlement is right for your household's debt management scenario.

Utah: Debt Settlement as a Solution

Approximately 9 million Americans reach out to the organizations that offer debt settlement every year.

In 2007, Utah signed onto the Uniform Debt-Management Services Act, designed to shield consumers by requiring registration, agreements between the debtors and the servicers, and by providing enforcement measures should an organization not comply with the rules.

Under the terms of the Act, all debt settlement providers must be licensed with the state, which keeps a list of registered companies at the Utah Division of Consumer Protection's website.

Once you've confirmed that your debt settlement prospect is on the list, make sure you understand the details of the debt settlement arrangement.

When to Use It

Debt settlement can be a tool to pay off a single debt in one go. While credit counseling in general is a prerequisite for debtors before they file for Chapter 7 or Chapter 13 bankruptcy, debt settlement is not.

How It Works

Settlement works when a party representing the consumer, such as an accountant, lawyer or company, settles (negotiates) a pay-off amount with the creditors that is less than the original debt. Consumers pay the settlement company according to an agreed-upon schedule and the company pays the creditors when all the funds are received.

State-Specific Details

Under the Uniform Debt-Management Services Act, your provider must disclose all fees in advance. Set-up fees cannot exceed $50 for consultation, and they can't be more than $50 per month for services. Furthermore, the provider must give you in writing a full estimate of the time-frame that the debt settlement plan will entail, plus they must tell you in writing all the ways debt settlement can impact your credit score. And then, read the fine print. If you're working with a lawyer instead of a nonprofit counselor there may be legal and filing fees attached to your plan, and those aren't always limited by the state's provisions. Remember that any amount of debt that is forgiven under a debt settlement plan is almost always treated as taxable income. 

Read Utah’s law for the complete details.

Credit Counseling

According to the Consumer Credit Counseling Service of Utah and Nevada, “a Certified Consumer Credit Counselor will review your financial information at no cost or obligation to you. After a complete evaluation, your counselor will provide you with options, resources and if your budget permits, a repayment plan to consolidate your debts to be worked out with your creditors. You will then make regular deposits to CCCS and, in turn, the agency will forward payments on your behalf to your creditors to obtain concessions such as reduced or waived finance charges and penalty fees.” 

Credit Counseling Steps

Talk to a credit counselor

You can find a list of organizations that meet Utah’s standards at the National Foundation for Credit Counseling.

Check out the costs

When you talk to a credit counselor, always find out what their fees and charges are. Many agencies offer one or more free consultations and charge reasonable fees after that. If the service fees and monthly fees are over the $50 dollar range, keep looking around. Some counseling agencies will even waive these fees if the financial need is great enough.

Be transparent

It is important to provide complete information about your financial situation. This includes disclosing accounts, personal spending habits, and income so the counselor can find the best solution for your situation.

Implement changes

When you receive advice and guidance, be sure to follow-through. This is the only way to change your situation and make improvements that are needed. As you do so, be sure to record all the steps and always keep your paperwork and documents.