Table of Contents

Debt Settlement

The following information pertains to how debt settlement works in Vermont, and it can help you to determine whether the option is right for you.

Your Solution?

Debtors in Vermont are not alone. Some 9 million Americans reach out to the organizations that offer debt settlement every year.

To provide debt settlement services in the state, Vermont organizations must register with the Department of Banking. And consumers should check first to see that the agency with which they're dealing has done so. You can contact the department here.

Once you've confirmed that your debt settlement prospect is on the list, make sure you understand what are the typical steps of the arrangement in your state.

When to Use It

Setting up a debt settlement plan can allow you to pay off a single amount owed all at once. 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

An organization, attorney, or public accountant negotiates a one-time payment with a creditor, a lower amount than the full balance owed. The debt settlement provider then receives your payments and provides them, as agreed upon, to the creditor.

For Vermont Residents Only

The Vermont Debt Adjustor's Act specifies that your provider must disclose all fees in advance — these cannot exceed $50 for set up and they may not be more than 10 percent of any payment received for the purposes of settling the debt. They must also provide in writing all the ways debt settlement can impact your credit score. The state has additionally put into place certain protections when it comes to canceling your debt settlement plan, should you wish to do so. You have until midnight of the third day after signing your contract with the adjustor, after which the debt adjustor has 10 days to return to you any payments that you've given them.

Additionally, read the fine print of any contract. 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. Also, any amount of debt that is forgiven under a debt settlement is almost always treated as taxable income.

You can see the full language of the Vermont Debt Adjustor's Act at the following state website of statutes.

Credit Counseling

In many cases, credit counseling can clear a path to a more manageable scenario. Some 9 million Americans have already sought such aid. What follows are the key ways in which credit counseling works in Vermont. The state requires its credit counseling services to register with the Department of Banking. Before you engage with any debt adjustment organization, first check to see that it's on the state's list. You can contact the department here. You can also check the U.S. Department of Justice's list, which gives the organizations that are federally registered to provide services in Vermont.

After deciding what agency you are going to work with, it’s important to understand the process and set reasonable expectations. The following are a few pointers to help.

When to Use It

Partnering with a credit counseling agency helps you get control of personal debt, which over time can help improve your financial health and credit score. People who are considering filing for Chapter 7 or Chapter 13 bankruptcy are required to have counseling – with the intent that spending habits will be changed for the better.

What counseling will not do, however, is clear your credit history, instantly improve your credit score or change your habits for you. These all take time and effort that come as the process unfolds.

How It Works

Creditors agree to work with counseling agencies once these parties agree on terms and conditions of the case, such as reduced interest rates, lower monthly payments, and waiver of fees (in some cases). Clients receive help making budgets, setting spending limits, and making scheduled payments to the counseling agency. These payments are then made to the creditors on an agreed-upon time-frame. If you choose counseling, you agree not to open, apply for, or use new lines of credit during this process.

For Vermont Residents Only

The Vermont Debt Adjustor's Act specifies that your provider must disclose all fees in advance — these cannot exceed $50 for setup and they may not be more than 10 percent of any payment to creditors. The state has also put into place certain protections when it comes to canceling your plan, should you wish to do so. You have until midnight of the third day after signing your contract with the agency, after which it has 10 days to return to you any payments that you've given them.

If you have questions or complaints about consumer credit service organizations, contact the state Attorney General's office (which also keeps a list of enforcement actions since 2009).