What to Expect after Month 6 on Debt Settlement

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What to Expect after Month 6 on Debt Settlement

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What to Expect with Debt SettlementIn Debt Settlement: Months 1-6 we discussed what to expect during the first six months of your enrollment in a Debt Settlement plan. During this time plan participants may begin to receive collection calls from creditors which occurs when the account becomes delinquent. As we discussed, this is normal and should be expected. Our debt settlement customers have explained they are no longer able to afford to pay the creditor's minimum payment which means the creditors are not receiving payments. With the majority of the payment going to finance charges, who could blame them?  

This blog will discuss what you can expect after the 6th month on your Debt Settlement plan. For many of our customers this is a crucial point in their plan. Some customers may decide they are not able to continue with debt settlement and choose to file bankruptcy, or work with the creditors directly. Remember that settlement is an alternative to bankruptcy for qualified candidates. Our goal is to keep our customers out of bankruptcy because of its long term implications. Working directly with a creditor puts you in a weak negotiation position and should be avoided. By making your payments on time to build your escrow, and communicating with CareOne you can be successful in paying off your debt.  

Debt Changing Hands 

After 6 months, customers may be receiving notices from collection agencies or collection attorneys, as opposed to their primary creditors like Bank of America or Chase. This is normal! In most cases a primary creditor will attempt to collect the debt for 90 - 180 days. If they are unsuccessful the debt is usually moved to an outside collection agency that works for the creditor, or is sold in the debt market where agencies purchase it for a reduced price and then try to collect it from the original debtor. This can be very advantageous for our customers because collection agencies may be willing to accept less than the original balance. If you notice that you are now being contacted by a collection agency, it is important to communicate these changes to CareOne so we can update your information and send a communication to the new agency.  

First Settlement!  

Success! I am sure many of you are reading this blog are wondering..."When does Rob talk about getting a settlement done?" On average our customers experience their first settlement after six to eight consecutive payments. The terms of the settlement can vary on a case by case basis, however most are arranged over 1 - 6 payments at 40 - 50% of the balance at the time of enrollment. Once a creditor accepts the settlement it is important for you to make your monthly plan payments on time because that money will be needed to fund the settlement. Use these first settlements as motivation to keep you going; as you can see the process works! 

Once an account is settled the creditor may send a 1099-C to both you and the IRS. Any amount of forgiven debt exceeding $600 can be counted as income. Be sure to cover this with your tax preparer when you file your taxes.  

Celebrate this victory! Cut up the card, scratch it off your list, and be sure to celebrate each of your settlements, as this means you are that much closer to being debt-free!  

Collection Calls 

These can continue and it is important to be prepared. We covered how to handle these in a previous blog. Creditors may tell you a variety of things in order to attempt to scare or intimidate you into working directly with them. Remember you tried this before and their "action plan" was to charge you a higher interest rate and tack on fees. Stay the course and continue on your settlement plan.  

If you are facing harassing creditor calls keep a call log detailing when they call. Include the date, time, creditor, and the person's name. This log can be used if you file a complaint with the Federal Trade Commission regarding a violation of the Fair Debt Collection Practices Act. 

Lawsuits 

In some instances a creditor may escalate their collection activity to the point of suing a customer for the balance of the account. If a creditor pursues this method you will receive a summons or some other legal document either in the mail, or from an officer of the Courts like a Sheriff. It is important to contact us as soon as this happens so that we can get the ball rolling to get you in touch with an attorney who can explain what is happening and provide legal advice. 

Related Posts

Top Ten Things to be Successful on a Debt Settlement Plan

Debt Settlement: Months 1 - 6

 

Rob TaylorRob Taylor   

Rob Taylor is a contributing author for A Straight Talk on Debt. Rob tells it like it is when it comes to the latest debt industry news and shares his advice on personal finance.

 

 

 

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  • Do I need to double my monthly payment amount after 6 months? I'm not saying I can ,but does this mean I will be hounded by card companies? I always payed my bills on time & also paid a lot more than min. payment

  • Good morning grannyl and thank you for reading my blog. You do not have to double your payment, however if you can it may accelerate your debt settlement plan and help get the accounts settled more quickly. In your post you stated you had always paid more than the minimum payment and had paid on time. Has something changed that you are no longer able to do this? Our debt settlement customers are usually delinquent on their accounts prior to enrollment and no longer have the ability to pay what the credit card companies are asking. I look forward to hearing from you. Thank you again for reading my blog.

  • i am now in my 3rd months and not harrassed by creditors yet, thanks and i will be patient :(

  • thanks this blog helped me and eased my mind in process. I guess like everyone just wish would hear if things r going ok. I receive phome calls but let answering machine get them.

  • how do i know when u send the letter to the companys for settlement  and  all my debt is from thir partys company so will my process be faster and when i will know no one has even call me to talk to me about the program yet

  • Good morning jerseyfiremoney and thank you for reading my blog. A notice is sent to your creditor when your first payment clears. In most cases the first three to six months is very much a "wait and see" period. Negotiations will begin in earnest as your trust account builds value. Most clients experience their first settlement after completing six to eight payments.

    Thank you,

    Rob

  • Hey guys, stay the course!!!  I have been in the program for 4 months and have already settled with one of my creditors.  I am anxiously awaiting  the next one and the one next one!

  • I was terrified at the beginning but the calls have subsided and after reading all the success stories, I am feeling much more confident.  I have drastically cut my spending and ask myself "Do I really need this?" before buying anything.  The best part is that I buy groceries first now instead of pay the credit cards and buy groceries with what's left over.

  • debt management/debt settlement?  when on debt management, could I possibly see settlements within the same time frame or do I need to switch to the debt settlement program?  We all know the sooner we succeed the better :)

  • I have been in the debt settlement since Nov 2009 and one card has settled. I am extremely concerned about Bank Of America and Chase b/c they are the ones I owe the most on and they said they do not negoiate with credit consolidators. If that be the case then am I wasting my time trying to build my escrow up hoping that they will settle? I haven't received phone calls or letters since they received the letter from careone. I am just worried about what is going to happen a couple of months from now.

  • hi. i was just wondering. my account with Chase has already been transferred to some law firm in GA. i enrolled with CareOne a few days ago. according to you, after about 6 months, will that law firm (Fredrick Hanna something) just accept the paid amount on its own, or will reps from CareOne talk to them to have the debt settled? how does this work?

  • tank you for the  feedback

  • Good morning,

    On average most of our customer have their first settlement after six to eight consecutive payments on their plan. In other instances it can take longer. It depends on the balance of the account, the amount of your monthly payment, and what the creditor is willing to accept. There are not any hard an fast rules for debt settlement.

    Thank you,

    Rob

  • I was in a DMP since 09/2008 but got behind (2) payments so I switched to DSP at a much lower payment. I've been in now (2) months. Calls are coming quite frequently. I have around 12K on about 13 different cards. None have over 2k balance. (3) have turned the account over to collection agencies... from the creditor point of view they haven't seen payments in four months. I can not afford to get caught in a situation where I am sued and wages are garnished. I'm in the education field and that would not be a very positive experience for me. Am I doing whats necessary or furthermore is Percels and CareOne doing whats necessary to avoid that experience by letting DSP run its course. Anyone been there done that?

  • I have been on DSP since March and will make my fourth payment next week. It's encouraging to watch my escrow increase! One of my two creditors has already sent my debt to a third party, so I hope negotiations will start in the next few months. Just keep going back to your Care One page for your account, and you can review monthly statements, check your escrow balance, and you can see if any settlements have been offered.

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