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The economic crisis in San Francisco has led to the enormous debts among citizens in the city with some of them filing for bankruptcy. Various lenders have therefore formulated some debt relief programs that help people cover their debts in the quickest way possible. Some of the ways include debt consolidation, debt settlement, and counseling among others. Debt settlement is an aggressive and faster debt relief program that involves combining all your debts and negotiating with the lender for a reduction in the total balance before paying a lump sum amount to cover the debt.

Socio-economic condition in San Francisco, California

San Francisco is one of the cities with the highest cost of living in the United States. The hourly wage in the city stands at 47% and an unemployment rate of 5.2%, but that is not enough considering the high living conditions. The city experiences limited housing development with the average house costs standing at $1.25 million while the median household income is $81,295. The average millennial credit score (25-34 years) stands at 745, which is different from an average credit card score of California that is at 687 and a median household income of $ 3,040.

Wealth and Poverty Inequality in the Region

The wealth and poverty inequality in San Francisco ranks among the top in the United States. The income gap between the poor and the wealthy has continued to increase despite the efforts to increase everyone’s minimum wage limit. Due to the economic difference, the low-income residents in the country are struggling to meet their basic needs. This has led to all forms of debts ranging from student loans, credit card debts, medical debts, SBA loans, and second mortgages.

How Does Debt Settlement work

The unsecured debts such as credit card leave the creditors and lenders with nothing to do in case the debtors fail to pay. Therefore, they opt for debt settlement when they suspect that they might not receive any debt repayment due to the debtor’s financial condition. Below are some ways of approaching debt settlement:

1) Debt Settlement Company

Anyone looking to repay their debts may opt for settlement as a way of debt relief. It involves hiring a debt settlement company that negotiates for a reduction of their client’s total debts. After the negotiations, the debtor makes monthly payments to the debt settlement company, which then contributes to your creditors. The debt settlement company cannot charge you an upfront fee. Therefore, they can only receive money by making a deduction from the percentage of your total debt or the settlement.

2) Debt Settlement Lawyer

Debt settlement attorney is the other option that a debtor can use to carry out negotiations on their behalf. In this case, the lawyer works at reducing the debt that you pay directly to the lender or creditor until you have completed before moving to another one. The lawyers may bill you a fixed fee for every lender, a percentage of the debt eliminated, or the hours that they spend on your service.

3) Personal negotiations

You may decide to carry out negotiations yourself instead of seeking help from a company or a lawyer. Ensure that you have complete information about debt settlement rules and regulations before seeking help from a creditor. Some banks have hardship programs that can be of help while settling a debt. In this case, you need to be well prepared with a lump-sum offer to resolve the debt all at once. Remember that the creditor can deny settlement if they realize that you have retained other loans up to date.

Rules and Regulations Governing Debt Settlement Program

San Francisco follows a set of federal laws and a statute of limitations that govern the lending industry. A statute of limitations indicates the maximum period after which the collection agencies or creditors can initiate legal proceedings. The statute of limitation varies from one state to another depending on the state where the transaction took place and not your current state of resident. The maximum interest rate that a collection agency can charge is 10% while the law gives you 75% wage protection.

Eligibility Criteria

It is not everyone who is eligible for a debt settlement program especially if you owe high debt amount. Below are instances that qualify you for debt settlement

  • If you have an unsecured debt of more than $7500.
  • If you are several months behind in payment.
  • If you are in a severe financial hardship condition with no existing means of acquiring income.

Other Debt Management Resources

A debtor can try to seek help from the low-cost resources in San Francisco if the settlement does not work. The resources take care of the debt without affecting your credit score in any way. Some organizations such as Mission Economic Empowerment Agency provide debt and credit coaching to the debtors. You can also try other debt relief programs such as consolidation or the hardship program offered by the banks to minimize the amount owed.