For a long time, the known options for debtors have been to pay the creditor in full or to file for bankruptcy. Many people fail to realize that you don’t always have to cave to the demands of the creditor. In debt settlement, you can negotiate and agree to settle the debt for a lower amount.

But before you settle on this alternative, it is critical to find out if it is the right choice of relief in your circumstances. Seasoned Plymouth bankruptcy attorneys can elaborate on debt negotiation and tell you when to go for it.

Are Negotiations Possible Without Creditor’s Willingness?

You cannot possibly negotiate without the creditor’s willingness to negotiate. Notably, the creditor is under no obligation to negotiate with you. Debtors can only hope that the creditor understands that it is easier and faster to settle through negotiations than through trial.

In a trial, the creditor incurs a lot of legal fees, and it might take longer for the court to conclude the case. So, if the creditor is convinced that a debt settlement is better for him/her, it might be possible to negotiate. It could be challenging to convince a creditor hellbent to sue you.

What Types of Debts Can One Negotiate in Massachusetts?

You might want to explore debt settlement, but you have to be sure that it is the right kind of debt. Some of the debts that are viable for negotiations include:

  • Private student loans in default
  • Old judgments
  • Personal lines of credit
  • Signature loans
  • Old repossessions
  • Department store cards
  • Credit cards
  • Other unsecured debts

On the other hand, debts that might not qualify for settlement include:

  • Hospital/medical bills
  • Credit Union Debts
  • Car loans
  • Federal student loans
  • Home mortgages
  • Other secured debts

If you are uncertain about whether your debts are negotiable or not, an experienced debt settlement lawyer in Plymouth, MA, can give you clarity.

Do I Need the Services of a Debt Settlement Company?

While for-profit debt settlement companies market their services by promising to cut your debt by up to half, debtors should be aware of other costs. The company might not mention it, but you might also pay:

  • Accumulated interest on credit card accounts
  • Late payment penalties
  • The company’s fees

So, while the offer might sound great, make sure that you seek full disclosure of everything. Some might be working with the credit card companies for a commission, and might not be determined to get you the best possible deals in the negotiations. Ensure that you check other consumers’ reviews before settling on a settlement company.

Can I Benefit From Non-Profit Debt Settlement in Massachusetts?

Non-profit debt settlement is great because there are no interests, and any balances remaining after the repayment period are usually forgiven. However, you cannot negotiate for rates lower than agreed between the credit counseling agencies and the various creditors.

The rate could be fixed between 50% and 60% of the debt owed. Qualifying debtors need:

  • 36 months to complete the program
  • More than $1,000 in debt
  • No payment paid in the last 180 days

Furthermore, note that payment delays can lead to the cancellation of the program. There is also no extension to the 36 months.

When Can I Get Tax Exemptions in Debt Settlement?

Sometimes, the difference between the money paid and the debt owed can be considered taxable income. Note that creditors might report the settled debt to IRS, which will expect you to pay tax on the debt savings. However, you could be exempted from filing form 1099-c in certain circumstances.

If you can prove that you are insolvent, you might not have to pay taxes for the forgiven debt. Insolvency means that your total debts exceed the fair market value of all your assets. Determining insolvency is often complex, but seasoned Plymouth debt negotiations attorneys can help.

When is Bankruptcy a Better an Option?

Negotiations could fail even after your Massachusetts bankruptcy lawyer tries their best. You might want to file for Chapter 7 or 13 bankruptcy in such instances. This alternative can stop utility shut-offs, garnishments, repossessions, foreclosures, and get rid of unsecured debts.

You will have to develop a repayment plan for 3-5 years in Chapter 13 bankruptcy. In Chapter 7, you might have to let go of all non-exempt assets to get the debts discharged. Skilled Massachusetts debt negotiations attorneys can advise you on what to do when you fail to agree with a creditor.

What Are the Upsides of Debt Negotiations?

While there are debt relief options that can wipe off all your debts, they can damage your credit score. This could mean that the debtor struggles to find financing at reasonable interest rates for the next 7-10 years.

It might be indicated in your credit history that you settled a debt for less than was owed, but your score remains unaffected. So, make sure that you get the best possible deal. You can begin with 30% of the debt, and leave room to go up to 50%.

When Do I Need an Attorney in Debt Negotiations?

Debtors need an attorney at every stage of the debt negotiations. While some opt to negotiate by themselves, experienced Plymouth debt negotiations attorneys could be advantageous. Their understanding of the process and ways to make creditors settle is necessary. They can also:

  • Help with planning the debt repayment process
  • Provide sound legal advice
  • Prepare you to file for bankruptcy if the creditors become stubborn, and the negotiations fail
  • Prepare you for the court process if the case goes to litigation

Attorneys Assisting You Realign Your Finances

Debt negotiation is an excellent option, but you don’t want to go into it by yourself. Without prior experience, you might not fully understand the process. You might also not have mastered ways to convince creditors to agree to your proposed repayments.

On the other hand, a lawyer is a master of this and can guarantee the best possible outcomes. Speak to our legal experts in Plymouth today to discuss your debt relief options.