Is Debt Settlement for You?
There are pros and cons of using debt settlement to erase your debt.
The pros are:
- Lenders are often willing to cut your debt in half, or more.
- It is harmful to your credit score, but less harmful than a bankruptcy.
- A bankruptcy stays on your credit history for ten years, a debt settlement stays on your credit history for only seven.
- It’s an option to get a debt consolidation loan if your credit score is too low.
The cons are:
- You have to have enough cash, or access to it, to pay off the lump sum agreed upon.
- A debt settlement generally takes two to three years, which means 24 to 36 months of late fees and penalties and additional damage to your credit score.
- If you have more than one creditor, you will have to negotiate with each one individually —again, more time and more fees, penalties, and credit damage.
- If you seek a debt settlement through a debt settlement company, they will charge you additional fees.
- The lender can refuse. Lenders don’t have to accept settlement offers.
- The IRS may count the amount forgiven as income.
What Is Repossession?
Repossession is when a creditor takes back something you purchased on credit without suing you first. This is usually done when you’ve fallen behind on your scheduled payments, but it can be done for other reasons. For instance, a creditor can repossess a vehicle you’ve financed if you don’t maintain insurance coverage on it.
What Can Be Repossessed?
Technically, any item or piece of property that you haven’t completely paid for can be repossessed, but it’s doubtful that a creditor is going to bother taking back something of little value.
Creditors tend to go after big-ticket items, including:
- Houses (foreclosure)
- Motor vehicles (cars, motorcycles, RVs, trucks, etc.)
- Boats and other watercrafts
- Major appliances (refrigerators, washers, dryers, etc.)
- Power tools (table saws, drill presses, lathes, etc.)
- Electronics (big screen TVs, stereos, home theater systems, etc.)
- Rent-to-own items (furniture, appliances, etc.)
- Any property put up as collateral
What Can I Do to Avoid Repossession?
There are several things you can do to avoid repossession of your property, including the following:
- Make up the payment or payments that you missed: Creditors would generally rather get the money they’re owed than go through the hassle of repossessing something. Maybe you can get money from a family member or other source. When you do make the payment, make sure to include any applicable fines and late fees. This will ensure that you don’t default. It would also be a good idea to call the creditor and inform them that your payment is on the way.
- Refinance the property: Work with your creditor and see if you can work out an interest rate and payment schedule that will better suit your repayment abilities.
- Declare bankruptcy: When you file for bankruptcy, an automatic stay is issued. This means that all collection activities aimed at you will immediately stop. You’ll get no more phone calls and letters from collection agencies, and any repossession efforts will cease. Under Chapter 7 bankruptcy, you are allowed to keep tools for your occupation and a car for transportation. If the loan you’ve defaulted on is for a personal watercraft, a luxury car, or anything that isn’t a reasonable necessity, it will not be protected from repossession.
How can Repossession Lawyers help?
A financial crisis can occur at any time in a person’s life. It can come suddenly and have a devastating impact on a person and their entire family. You could get laid off from your job or suffer an injury or illness that kept you from working for an extended period of time.
Unfortunately, your creditors don’t take this into account when they come looking for their money. If you’ve fallen on hard times and missed some payments, you could be facing repossession. Before that happens, you’ll want to talk to an experienced debt settlement attorney.