The term ‘debt settlement’ in the context of debt relief is used to refer to a situation where a creditor agrees to forego a certain amount of debt owed in return for a one-time payment of the remaining amount. If you are broke on the verge of filing for bankruptcy, debt settlement could be a viable option for you. Due to the high cases of scams revolving around debt settlement and misappropriation of facts vis-à-vis its effects, this debt relief option is rarely advertised or recommended outside of the debt settlement industry. This explains why so many people don’t know about the existence of debt settlement as an option for debt relief in the US.
However, the state of Louisiana has recorded a rise in the number of residents opting for debt relief options such as debt settlement to help them get rid of their increasing amounts of unsecured debt. This trend is attributable to the prevailing socioeconomic conditions in the state. Currently, the state of Louisiana features in the ten poorest states in the United States, just below Mississippi and New Mexico.
The state’s unemployment rate is around 6 percent and the median income below the national level. Over 19.8% of the Louisianan populace live below the federal poverty line, which means, nearly one out of five Louisiana residents live below the poverty line. The states racial disparities regarding household incomes and poverty levels continues to worsen the already bad situation. Comparatively, racial minorities record the highest poverty rates in Louisiana.
How Debt Settlement Works
If you come to the realization that your current debt situation is getting worse but can afford to put together about half of the amount you owe, your best option would be to approach a debt settlement company. The company will assign a specialist for your case, who will in turn approach a creditor and negotiate on your behalf. Depending on the severity of your case, your creditors may agree to forgo the remaining amount and write off your debt. Your credit report will still indicate that the debt wasn’t fully settled.
Only unsecured debts like credit card debt, medical bills, and personal loans can be footed via debt settlement plans. The representative may be able to reduce your debt by about 50 percent. However, you should be careful with the debt management company selection process. As stated earlier, cases of debt settlement scams are rampant. You can check the debt settlement company’s accreditation with Better Business Bureau before you approach them.
Advantages of Debt Settlement
- Debt settlement programs help an individual repay their debts in shorter periods of 2-4 years, which is faster than other debt relief options such as debt consolidation and credit counselling. It would take years, probably more than a decade, to settle some of these debts if you stuck with the initial payment plan.
- People with legitimate debt payment problems can benefit from a debt settlement programs. They get a chance to get away from overwhelming debt burdens without severely hurting their credit score.
- Debt settlement is the better option to filing chapter 13 bankruptcy which has more severe effects on your credit score and daily life. One could lose their job and face potential fraud charges if an employer finds out that they lied about having filed for bankruptcy. It’s now a common question in American interview rooms.
One major downside with a debt settlement program is its potential effects on your credit score. Debt settlement remains on your credit record for seven years, and during that period, you’ll have a very hard time trying to convince lenders to give you a loan.
Debt Settlement Laws in Louisiana
The state of Louisiana respects the guidance of the Fair Debt Collection Practices Act (FDCPA). Under the FDCPA, the creditor:
- Cannot contact a person who does not currently reside in the debtor’s home.
- After the debtor has issued a notice to the creditor to cease communication, the creditor can only mail them once in a month.
- You cannot make more than four personal contacts with the debtor after the notice to cease communication.
- The cease communication decree will be voided if the creditor sues and wins the case.
Despite an increase in household income in the last few years after long periods of stagnation, a significant percentage of the populace continues to sink deeper into unsecured debt. Louisiana residents with copious amounts of unsustainable credit card, medical, and personal debts can explore debt settlements and other viable debt relief options available to them.