Debt Settlement in the Golden State |
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By: Bobby Zangrilli Posted: 2007-01-30 23:55:42 |
| Debt settlement, also known as debt negotiation or debt reduction, is a relatively new way for dealing with your debt problems. In a debt settlement program, by negotiating with a creditor, a client can reduce their debt by as much as 50 percent and be debt free in as little as 12 to 36 months.Debt settlement is a great solution for consumers feeling overwhelmed with credit card debt that find themselves either falling behind on their payments or just able to afford the minimums. Considering the savings, in most cases it’s worth doing if you find yourself in any of the aforementioned situations. To give you an example, our average client with $30,000 in credit card debt and only has to pay $500 per month for roughly 33 months, which includes all our fees. Compared to what they were doing ($30,000 at 18 percent interest and only able to afford the minimum payment), the average client is able to cut their balance down to $16,500 and save more than $60,000 in interest charges alone.In order to achieve these savings, however, a client must voluntarily fall behind on their payments to their creditors (if they haven’t done so already). Depending on your current credit standing, this may have an adverse effect on your credit. For California consumers who are on the verge of falling behind or have fallen behind on their payments, this should be of little concern, and it is more important to take action to resolve the account instead of searching for the “fountain of youth” of debt relief----third party help that does not affect your credit negatively. More importantly, it should be noted that since your debt will be eliminated within 12 to 36 months and the amount you owe comprises 30 percent of your credit score, a quick recovery without the harsh stains of a bankruptcy filing on your credit means that in long run, your credit can be restored. With proactive rebuilding, it’s possible that your credit can be restored in as little as 6 months upon completing a debt settlement program.Regardless of what state you live in, your credit may suffer as a result of debt settlement program, particularly in the short-term. One advantage of debt settlement in California is that there are highly favorable state collection laws that do not exist in other states, which prohibit certain types of creditor harassment.California Debt Settlement and California Collection LawsEvery state has laws that say if a collections agency is collecting a debt, they are legally obligated to stop contacting a consumer if the consumer sends a Cease and Desist letter and/or a Power of Attorney notifying the collection agency that a third party is responsible for handling all communications with the creditor. California law takes it a step farther and not only limits harassment from collection agencies, but also from the original creditor as well. In most states, when a consumer falls behind on their payments and the debt is still being collected by the original creditor (the bank that originally lent you the money or the hospital that serviced you, for example), then the creditor is reserved the right to call the debtor on a daily basis in order to collect whatever is owed, and although debt settlement companies servicing these clients can very easily reduce the calls (changing of your phone number and address and notifying the creditor that you are seeking third party help, for example), no one can ever make the calls completely stop.This is not the case however for California debt settlement clients. In California, the same law that deals with what collections agencies can and cannot do when collecting a debt also pertains to the original creditor. What does this mean in practice? It means that a debt settlement company servicing someone from California can easily get the calls to not only reduced, but completely eliminated all together (sometimes within days).Debt Settlement in California and State Garnishment and Homestead ProtectionsAlthough the vast majority of California cases settle, as anyone who has ever read a debt settlement contract will tell you---it’s impossible for a debt settlement company to guarantee that a client won’t be the target of any legal action by their creditors. After all, creditors are always reserved the right to sue debtors to collect a past due account, regardless of whether the consumer is taking any action to resolve the outstanding debt. That being said, in most cases creditors prefer to settle since it’s guaranteed money; they do not have to waste time and money by hiring a lawyer to collect a debt that has a low probability of being paid in full anyway; and they fear that by refusing to settle, a consumer may turn to bankruptcy, which more often than not means they’ll recover nothing from what was owed. Moreover, reputable debt settlement companies strictly underwrite their cases so as to not approve someone who historically have proven to be in jeopardy of legal action.California has a more complicated form of handling state exemptions, so for information on California exemptions, you should contact a lawyer.Debt Settlement in California and Community Property LawsIf you are married, reside in California, and are seeking debt settlement services, you should enroll any and all debts that were accumulated during the marriage by both you and your spouse. Just because the debt is owned by only one partner the other partner is not exempt from having to pay for it as well under California law, unless it was accumulated before you were married. Creditors know that both husband and wife are liable for each other’s debts and may use it to their advantage in the collections process. |
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