Articles Posted in Debt Negotiation

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Retirements accounts are usually safe from common creditors both inside and outside of bankruptcy. If the creditor can’t touch the retirement account, it would not be wise for you to do any of the following:

1. Take a loan out against the account
This is a common issue and it is typically a result of good intentions. Most people who are facing financial problems do not want to file for bankruptcy and will do almost anything to avoid it. This shouldn’t be one of those things except in very limited circumstances. Speak to an experienced bankruptcy attorney before signing the loan documents.
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Auto finance companies can repossess your car if your are late, they don’t have to wait a certain period of time to do so. Partial payments won’t typically slow the repossession process down and pleading your case to the lender doesn’t guarantee that they will wait forever.

If you are unable to catch up the car payments and the car is repossessed, the “repo man” can’t “breach the peace” however. Generally, this means that he can’t:

1. forcibly remove you from the car 2. force you to stop 3. break into property in order to get the car 4. pretend to be a law enforcement officer 5. threaten you or assault you
If any of the above occur, it is probably wise for you to step away and call the police.

If you want to save the car you may have one of the following options:
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I don’t sell bankruptcy as a commodity. Why?

1. There are other options that may better fit the client’s situation.

2. The client may have personal reasons for choosing to deal with the debt before relying on bankruptcy.

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It is true. Debt can be”negotiated” allowing a debtor to pay less than what is owed to a creditor.

However, there is no Federal or Arizona state law that forces a non tax related creditor to take less than what they are owed outside of the bankruptcy context.

Unfortunately, the belief that this may be true is being trumpeted by certain debt negotiation “professionals” on radio and TV.

This “pitch” may sound very appealing at first listen. To the honest debtor, with a sincere desire to pay back debt, these claims may sound like a godsend.

The key phrase to remember however is, “if it sounds to good to be true, it usually is”.

For those with serious credit card, medical bill, or business related debt who are trying to avoid bankruptcy or who have been told they don’t qualify for a chapter 7 and are trying to compare chapter 13 to negotiating debt, I am providing the following shortlist of debt negotiation pros and cons.

Debt Negotiation Pros

1. Debt is reduced – If you are able to negotiate successfully with the creditor, the amount you pay will be less than the amount you originally owe.

2. Budget – Putting together the funds to make reasonable offers to settle may require that you live on stricter budget than you may be used to. Good practice for avoiding debt in the future.

3. Simpler – Compared to filing a bankruptcy, saving money and settling with a creditor could be simpler.

Debt Negotiation Cons

1. Creditor Calls

If you begin to make payments monthly to a “debt settlement professional” you will likely continue to get collection calls. There is no legal method that prevents an original creditor from contacting a debtor except the automatic stay relief of a bankruptcy petition in Arizona.

Just because someone promises that the original creditors won’t call, doesn’t mean they won’t. Third party collectors are controlled by the Federal Fair Debt Collection Practices Act and can be stopped, by writing a short letter asking them to. You don’t need to hire someone to do that.

2. Credit Report

Most debtors do not have the funds handy to settle the debt with. This means that they must stop paying creditors in order to save the money necessary to settle and to convince the creditor that they are a “hardship” case that should be considered for settlement. While the money is being saved, the credit score is dropping.
3. Forgiven debt is taxable

Unless you fall under the IRS “insolvency” exception, you will have to treat the forgiven portion of the debt as income on your tax return. (Bankruptcy is the other exception).

4. No guarantee

If someone guarantees you a result, run…fast.
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If you have credit card, medical bill debt, or other unsecured personal loans that are so large you can’t pay them off in a reasonable amount of time, you will likely end up using one of the following options to deal with it.

1. Borrow your way out

In the recent past, most with serious unsecured debts would turn to their home in the form of a home equity line or second mortgage. This was a quick fix that usually provided a lower monthly payment to service the same amount of debt. The obvious problem now? Loans are more difficult to come by.