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Hi there, Michael Bovee with Consumer Recovery Network and
thanks for tuning into our YouTube channel,
DebtBytes today.
I'm continuing with our pros and cons the series talking about
debt relief options, at least the most mainstream ones, and
going down a list real quickly, about hey, man, this works for
me for these reasons, and I like it.
I get these attributes, and then, it kinda sucks about this
option, and maybe it'll prevent me from even going down that
path, which is mainly what the purpose of the channel is.
And this video is focused on debt settlements.
So first, we're gonna start with the pros,
the benefits to debt settlement.
And the number one reason, and it's the best reason, frankly,
is the savings,
the money that you spend on it is less than what you owe.
So what you can accomplish and
we've got tons of videos up on settlements
in this YouTube channel, but what you can accomplish
with savings is gonna vary from one creditor to the next.
I've probably covered most of the banks in videos on this
YouTube channel, so look for those particular banks or
debt collectors that you might already be dealing with,
and I'll tell you what you can typically tend to target as far
as savings.
But let's just for a minute, for
the purposes of this video, assume you can save half or
a little under half of what you currently owe on your credit
card bills and some other types of debt.
Big benefit, right?
Next is time.
Okay, so when you compare debt settlements to what you
are engaged in right now, if you're current with your
creditors or just starting to fall behind,
if you were to continue to make minimum payments for
the rest of your balance, most of your statements come to you
these days and it tells you how long it's gonna take you
to pay your balance off at the rate of minimum payments.
And you'll see that oftentimes those are ten, fifteen,
twenty or more years.
So you save a ton of time when you're doing settlement because
you're not paying back that full balance and
you're typically doing it in a lump sum.
So, on average, you're gonna shave many, many, many years off
of how long it's gonna take you to get out of debt.
And when you compare debt settlement with other options
like debt consolidation, especially credit counseling,
they have a fixed period of time of repayment of five years or
sixty months, sometimes less, where settlement,
you can actually be done in a month if you can get your hands
on the money.
So timing is different for everybody but it's a huge,
huge benefit.
Next, another pro and it's self explanatory, it can help you,
debt settlement can, avoid bankruptcy.
Without going into a bunch of the minutia and the details
about why you might choose bankruptcy over settlement,
there's a lot of viewers on this channel that are looking for
a way to avoid bankruptcy at all cost.
Whether you should or not, we can talk about the pros and
cons video about bankruptcy and I'll just leave it at that.
But, yes, debt settlement absolutely provides you
an alternative to bankruptcy.
This next one is one of my favorite reasons to
choose settlement over other alternatives, and
it's the number one ingredient that it has over almost any
other version of debt relief, and that is that it's flexible.
That's the biggest pro besides savings, as far as I'm
concerned, money that you save settling debt is that it's,
you're not on a fixed payment like you are in a consolidation. Right?
Whether it's through
repaying a consolidation loan, balance transfers,
working with a credit counselor, and you're not on a fixed
payment in a Chapter 13 bankruptcy, which you can
watch our pros and cons video like I said for more about that.
But you might be able to save up and
do settlement over six months.
You might be able to save up and do settlement over 12 months,
13 months, 14 months, 15 months, 24 months.
It's got the flexibility built in there for
you to have a setback.
If you work on commissions, to have a bad month.
So flexibility in settlement is the best
attribute of it when you compare it to the other alternatives
that are very fixed and do not have that flexibility,
which is why you can start some of these other options and
never complete them cuz they're inflexible.
Settlement has you covered there.
Okay, so settlement is actually better for
you, depending on certain goals, okay?
So if you're trying to do a mortgage or your life plan is
that you want to get qualified for student loans, either for
yourself or for a loved one like a parental plus loan, you
are going to find that you don't want to have filed chapter 7 in
the last couple of years, if that's one of your goals, right?
Cuz you're not gonna be able to get federally backed student
loans after, for a certain period of time, after
having filed chapter seven, or if you're involved in a 13 even.
And you're also not gonna be able to get FHA approved type of
underwriting standards for a home loan,
which are some of the most flexible, and
interest rate benefit,
after having filed the chapter seven for a couple of years too.
So, if you got some specific goals, then you're gonna be able
to accomplish those goals while settling and getting rid of
debts that wouldn't be able to do in other scenarios.
So, it's again, kinda same as flexible,
settlement being flexible, but it's life oriented.
Not everybody's gonna be thinking about mortgages and
student loans, so it's just not an issue.
For those of you that it is,
let's talk about it in the comments below.
Tell me a little bit more about what your timeframes are, what
the goals are that you're trying to accomplish, and I'll give you
some feedback about why a settlement might work better for
you, or why I would just still avoid it, and you might have the
wrong impression about Chapter seven or something like that.
Okay, so let's move onto the cons, and there's many.
They're not talked about openly by people that pitch settlement
as a debt relief option,
because that's how they make their money.
I'm a debt settlement guy, I'm a recognized national expert.
Here's why you're gonna avoid it, okay?
Credit scores, credit reports.
All right, so here's the problem with credit scores and
credit reports.
Yes, it's a con, debt settlement, and
you have to fall behind or you're not gonna settle with any
creditors if you're still current with them, right?
So you're gonna get your credit dinged.
How important is that?
You have to decide that for yourself.
Again, I'm here to help you understand what the drawbacks
are gonna be for you specifically on your credit,
right here in the comments.
You have to know going into this thing,
if you don't already when you're watching this video,
that your credit is going to get trashed, and
I mean the kind of trash that you won't recognize it.
So as long as you recognize that getting out of debt is way more
important than trying to have your credit score,
then debt settlement, not necessarily a con.
But if you think your credit score is more important than
anything else, this is gonna trash it, so
just know that your credit actually bounces back.
And I'll probably focus more on the pros and
cons part of this in the bankruptcy side.
So watch the pros and cons of bankruptcy.
But your credit bounces back and
for some quicker than you could possibly imagine.
In fact, depending on your situation, the amount of debt
you have, the accounts that you're gonna keep current,
you might bounce back very quickly from settlement.
You can click on the link above that'll take you to an article
about one of my former clients, she is a psychology professor at
Michigan State University, and read more about her story, okay,
and how quickly her credit bounced back.
And then for others, it's gonna take a couple of years for
your credit to bounce back.
Prepared for it, get out of debt, it's okay.
Next is, okay, so this is a different con for different
people and it has to do with the collections process, okay?
I've got tons of videos up and some articles on the CRN
website about how to handle debt collection calls, but
they come in fast and furious and
the collection notices in the mail too.
But you have to know that if you're not
paying your creditors, first, the banks are gonna start to
reach out to you in their recovery efforts and
then the third party debt collectors that get your account
are gonna be reaching out to you, potentially debt buyers.
So, you're gonna be dealing with an influx of
that kind of collection effort and
it's debilitating to some, not even debilitating to others.
We have technology at our fingertips today that
help you manage that collection process way better than when I
first started doing this kind of work in the 90s.
So, read that article right above, click on that,
how to handle collection calls,
take advantage of some of the technology things
that I point out that help you manage the whole situation,
the calls until you're able to do the settlement.
There is stress involved with those calls.
I get it. You're already
stressed out about money, haven't been paying your bills,
it's a huge psychological change for you.
There's ways to manage that, but yeah, it actually does suck.
Moving on, another con for a lot of people will be that you will
have to pay taxes on forgiven debt.
Let me explain this, and there's a little article.
You can click right above on my website about why, or
how you can avoid paying tax on forgiven debt.
But here's the gist.
If you settle a debt, and in that settlement, you save more
than $600, the creditor or the collector is supposed to report
that to the IRS the following January, and you'll get a 1099C.
They send it to the IRS so
the IRS is expecting from you to account for it, okay.
And if you are taxed on that,
it's gonna be at the rate that you're typically taxed, okay.
But you can avoid that tax if you are what's deemed
technically insolvent.
That's further explained in the article linked above.
Make sure and check that out because if you owe more than you
own, you might not owe the tax and for a lot of folks,
that's gonna be the case.
Next up is, it's more expensive.
Okay, so this was a pro, right?
You saved money but
in a way it's a con because you can save more
than you can in settlement by filing chapter seven bankruptcy.
Even sometimes chapter 13 frankly but
let's not do the math.
I just want to focus on the bite-sized part of this.
National average for a Chapter 7 bankruptcy is about $1,800.
That's soup to nuts, start to finish.
That's the attorney fees, court costs, everything involved.
As you get inland, like I am, you can start to find,
even in some of the coastal cities, you can
find bankruptcy attorneys that are gonna charge less.
And maybe you get in and out of your bankruptcy for $1,500.
Assume for a moment that you owe $20,000 on credit cards and you
settle for half, that's $10,000 compared to $1,500, all right?
So it is a cost thing, so Chapter 7, if it works for
you, is by far and
away gonna be the least expensive given that example.
Now, one of the benefits of debt settlement is that you can go
through it quickly and you have that flexibility.
One of the drawbacks is that,
unless you're in a position to come up with all the money you
need to settle your debts inside of 90 days,
not gonna be able to compete with Chapter 7 for time either.
So this is the last con for settlement that I'll talk about
in this video, is that whatever the time is for
you to get where you need to go and get the money in and
the resources to settle each debt, is it 90 days?
Because bankruptcy can be over that quickly.
All right, if you have questions about any of the pros and
cons or any of the concerns that you have that I might not have
talked about in this video, post them in the comments below.
I'm here to offer you my feedback for free,
I'll see you on the next video.
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