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From 2012 all through to 2017, the state of Washington has been recording an increase in the number of residents living below the poverty line. Washington has a total population of 6.7 million citizens and a poverty rate of about 14 percent, which means that close to one million of the Washington populace is living below the poverty line. As of 2013, the state’s unemployment rate was at 6.6%, which is slightly lower than the national average. Washington’s estimated median income as of 2014 was $55,427, which compared very well to the US average annual income of $51,552. However, high-income disparities between the top 20% households and the bottom 20% households in Washington contribute to the increasing number of residents living below the poverty line.

Though the state’s economy is thriving, much of the income generated does not reach low-income households whose incomes remained statistically unchanged. Much of the incomes gains go to the state’s top 5 percent households, and the rest goes to upper and middle-income families. As a result, most of the state’s low-income residents continue to experience financial problems. Washington’s average credit card debt stands at $5,269. Most of that debt distributed among the bottom income households which means that a considerable number of this demographic is stuck with mountains of unsustainable unsecured debt, which explains the rising number of people participating in debt settlement programs and services in Washington.

What Is Debt Settlement?

If you carry too much of unsecured debt that you can no longer sustain, you can approach your creditors and work out a deal that would allow you to pay a less amount than what you actually owe in a single payment. This situation is referred to as debt settlement. Debt settlement programs can be used to settle many forms of unsecured debts such as credit card debt, medical bills, telephone bills, and rent. A debt settlement program can reduce your total debt by up to 50 percent of the initial amount. The biggest challenge, however, is to raise the lump sum payment.

How Debt Settlement Programs Work

If you are a Washingtonian struggling with credit card debt and would like to participate in a debt settlement programs, here’s how to go about it.

  • The first step would be to conduct your own research on the debt settlement companies in your city. You can check with the Better Business Bureau (BBB) to ascertain the accreditation of the debt settlement firm you choose to go with.
  • Before you enroll for the program, the company will analyze your financial situation and present you with possible solutions. The company will then assign a specialist to negotiate with your creditors on your behalf.
  • The debt settlement firm, through your representative, will notify the creditors to cease communication with you and deal directly with them. If the creditors continue with the nagging calls or threatening emails, your representative will advise and help you take legal action.
  • Your representative will negotiate for a reduced amount of your debts. Upon payment, your debts will be written off.

Careful, though, the debt relief industry is full of scammers. Don’t forget to set aside the agency’s payment which you can only pay after they have successfully negotiated on your behalf and reduced your debt.

Benefits of Debt Settlement Programs

  • You get to avoid bankruptcy.
  • Settle your debts in a shorter time frame.
  • You are given a chance to get your financial situation in order.
  • Relieves you of your unsecured debt burden.

Effects of Washington Debt Programs on Your Credit Score

Since you did not fully settle the amount you owe, debt settlement will still appear on your credit report and will stay there for seven years which will hurt your credit score. Debt settlement is still a better option than Chapter 13 bankruptcy which would have much worse effects on your credit score.

Debt Settlement Laws in Washington

In Washington, debt collection practices are directed by the Fair Debt Collection Practices Act (FDCPA) and the Washington Debt Law.

  • A debt collection agency cannot charge more than 12 percent interest rate.
  • A creditor cannot threaten to hurt a debtor by ruining his/her credit rating.
  • A creditor cannot communicate with a debtor more than once a week at work or thrice at home.
  • Creditors must notify credit bureaus that the debt has been settled within 45 days.
  • The address and details of both the creditor and the collection agency must be included in all written communication.