What Is Debt Settlement?
Debt settlement refers to the process of clearing your debt with creditors for less money than you owe.
Level’s credit counseling products include a debt settlement solution for the quickest route out of debt for the least amount of money. It’s ideal for those seeking urgent debt relief and credit repair.
The goal of debt settlement programs is to significantly reduce your debt to creditors, and therefore the amount of money you need to pay on your card each month.
The reason, of course, is to resolve your credit problem and avoid the stigma or economic injury of filing for Chapter 7 bankruptcy.
Clients of Level Financing who engage in debt settlement typically reduce their credit card debt by 45%-50%. It’s important to realize that a creditor has no legal obligation to negotiate outstanding debt, so there are no guarantees.
However, as a debtor you have one important advantage seeking a credit settlement: Creditors view debt settlement as a form of insurance, since often they realize they are likely to recover more money through debt settlement than by referring your debt to a collection agency or law firm.
This gives us a solid foundation on which to open discussions with a creditor.
Benefits of Debt Settlement
Debt settlement has enabled thousands of people to get out of credit card debt quickly, without filing for bankruptcy.
If you’re frustrated by the slow pace of reducing or eliminating credit card debt, consider debt settlement as a valid, reliable option for expunging debt fast, and rebuilding your financial life.
Debt settlement lets you:
- Reduce monthly credit card debt by 45%-50%
- Avoid bankruptcy
- Avoid being sued by creditors
- Avoid a court judgment against you
- Eliminate third-party collection calls
How Long Does Debt Settlement Take?
Clients of Level Financing typically complete their debt settlement program in 24 to 48 months. Settled debt may stay on your credit report for up to seven years; however, by comparison, a Chapter 7 bankruptcy can remain on your credit report for up to 10 years.
Once your debt is settled, the best way to begin reestablishing good credit is to open one or two new credit accounts, use them responsibly, and pay your cards promptly.
Debt settlement is not a difficult process if you’re with the right credit counseling company. Level Financing’s debt counselors are accredited in analyzing personal finances, and fight every step of the way to secure your goal of becoming debt free. This includes advocating on your behalf not only with your creditors or lenders, but, importantly, with even yourself at times.
We know that learning a new discipline isn’t always easy, and consider it our responsibility, as well as our privilege, to supply you with the encouragement, resolve, articles, and insightful analysis you’ll need to cast aside your burden of debt and regain firm control of your finances.
Debt settlement is built around the idea that if you stop making regular monthly debt payments a creditor will accept less than the full amount due as settlement. In fact, creditors will often perceive it to be in their best interest to do so.
After examining your credit profile, we’ll give you an accurate estimate of how quickly we can settle your debt. Be aware that settlement negotiations with creditors can take time – sometimes up to two years. Patience is critical.
However, once you qualify for Level’s debt settlement program (our review takes less than a day), you’re ready to take the first step toward transforming your financial life through the fastest means available short of filing for bankruptcy.
Most clients who contact Level Financing have already stopped submitting their minimum monthly payments because they can no longer afford to make them. If they have not stopped paying, their financial circumstances are nonetheless precarious because they have been “robbing Peter to pay Paul” by transferring balances between cards and getting cash advances.
As with any breach of agreement, stopping payment carries risk, and we do not counsel clients to do so. However, creditors recognize that when people have stopped making their monthly payments it’s usually because they’re forced to. Rather than resort to litigation, which is costly and problematic for creditors in multiple ways, creditors often signal their preference to settle as a means of recouping at least some of their losses.
So while stopping payment carries risk, it’s also true that it is the only way your credit card companies will engage with your petition for debt settlement: They must first understand that you are no longer able to pay.
Next, you’ll begin transferring a lesser amount of money each month to a “utility” savings account, over which you’ll retain full control. This also is a key concept. Level will help target an appropriate deposit amount for you, but the money remains yours, is administered by an independent third party, and stays under your control at all times. If at a later date, for example, you should decide to discontinue the settlement process, the money remains yours (including interest earned) to redirect as you require.
But you’ll feel hard-pressed to abandon a debt relief process that is saving you up to 40% of the amount of money you pay each month to your credit card companies.
The monthly deposits you make to your utility account typically constitute just 60%-70% of what you’d pay to meet those minimum monthly credit card obligations. So in addition to having up to 40% more cash on hand each month, you will also have launched yourself forcefully on course toward building the financial resources required to make a persuasive lump-sum settlement offer to your credit card companies.
Once you’ve saved 30% of your total debt balance in your utility account, Level – with your permission – will begin the settlement-offer process.
Our credit counselors are skilled negotiators, having spent countless hours on the phone with banks and other creditors settling debt for over 20,000 Level clients confronting debt payments just like yours. The experience and acquired knowledge of our experts works to your benefit every step of the way, enabling negotiators to strike the most advantageous settlement balance possible.
This is where the real power of a debt settlement solution becomes apparent. Level typically negotiates your debt balance down to 50% of what you presently owe, demonstrating why debt settlement is, by far, the quickest and least expensive way to get out of debt short of filing for Chapter 7 bankruptcy.
IMPORTANT: For a debt settlement solution to work, it’s imperative that you still be able to make at least 60%-70% of your minimum monthly credit card payments. If you’re unable to meet this minimum threshold then debt settlement is not your best option for debt relief. In such an event, you may wish to consider a Debt Consolidation Loan.
Debt Settlement Fees
Level Financing charges no upfront fees, and assesses no fees until the resolution of a client’s debt.
Fees vary by state, and also by the amount of client-enrolled debt. On the whole, expect fees to reflect up to 25% of your total debt. When compared to the steep, ongoing fees incurred by making only minimum monthly payments on your credit cards, you’ll welcome debt settlement as sensible insurance against the high interest rates and fees charged each month by your card companies, and be amazed at the value of Level Financing’s debt solutions.
Will Debt Settlement Affect Your Credit?
One of the biggest misconceptions about debt settlement is that it will affect your credit report well into the future.
Naturally, ceasing payment to your creditors results in becoming delinquent on your accounts, and accruing late fees and additional interest. Your credit score will temporarily be negatively affected.
But what we’ve found is that once your debt has been settled your credit score actually starts to increase. In fact, customers who have finished the Level debt settlement program often discover that six months later their credit score is equal to, or even higher than, what it was before the settlement process began.
Will Debt Settlement Affect Your Taxes?
Forgiven debt is considered taxable by the IRS if it’s over $600. This means you will likely owe taxes on the forgiven or canceled debt amount of your cards. If you settled $16,000 worth of debt for $8,000, for example, then $8,000 was forgiven and is likely taxable. This forgiven debt amount will need to be reported to the IRS as ordinary income.
Alternatives to Debt Settlement Companies
Although it’s possible to negotiate a debt settlement yourself, it is considered risky. Inexperienced negotiators often lack the resources (particularly time), and can be quick to capitulate to the hardball tactics used by a creditor or collection agency to intimidate them into paying more than they might otherwise need to pay.
Such tactics can be dispiriting, inducing one to give up and file for bankruptcy.
Level Financing has the experience not to be intimidated, and to negotiate a settlement on behalf of consumers that will provide real savings, and an opportunity to help them make a fresh start.
Level will invest the time – sometimes up to two years – calling your banks and creditors, negotiating your settlement down from as much as 50% of what you owe to significantly reduce your debt burden and the amount you have to pay each month.
Our credit counseling team will develop a customized plan of attack, with the goal of wiping out your entire credit card debt and lowering your monthly payments to a fraction of what they were, in a fraction of the time it might take for you to do so on your own.
Since 2009, Level Financing’s experienced credit counseling experts have saved more than 20,000 people from financial ruin and the repressive burden of debt.
Our fully accredited debt relief experts are here when you need us, offering customized debt solutions and personalized customer service to help guide you toward achieving a lifestyle free of debt.
Call us at 888-922-4015, or simply click below to begin your journey to financial freedom.
Knowledge is power, and understanding your debt relief options is the first step toward a future free of perpetual debt. The next step is to take action.
See if you qualify for debt settlement by taking the brief quiz below.
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