Have you been online searching desperately for help with your debts? If so, you may have seen advertisements for companies that claim they can get your debts canceled or at least repair your credit. Naturally, it would be great to just get your debts canceled but is this really possible?
Is there such a thing as debt cancellation?
The quick answer to this is that “no,” there is no simple way to get most debts canceled. However, it is possible to get debts discharged through a bankruptcy. A chapter 7 bankruptcy would dismiss most of your unsecured debts, including personal loans and credit card debts. However, it would also leave a black mark on your credit report that would last as long as 10 years.
You could also choose to default on a loan. For example, suppose you paid back $2,000 on a $10,000 loan and then just quit making payments. If your creditor stopped trying to collect the remaining $8,000, the loan could be considered canceled.
Debt cancellation through debt settlement
It is possible to get some of your debt canceled through what is called debt settlement. The way this works is that you determine which of your debts is costing you the most or are the most bothersome and then call those creditors and suggest you settle the debt but for much less than what you owe. For example, if you were to owe $7,000 on a credit card, you might offer to settle the debt for $3,000 or $3.500 in the form of a lump sum payment. If your creditor agrees to a settlement, the remainder of your debt would be considered canceled.
How to make this work
Before you try to settle any of your debts, you should calculate your debt-to-income ratio (DIR). Determining your DIR is simple. Just divide your gross monthly income by your monthly expenses. If you have a 55% DIR or higher, most credit card companies will work with you as this is a way to prove that it is impossible for you to repay your debts. You will also have to stop making payments on the debts you want to settle and for at least six months before any of your creditors will talk settlement.
Cash in hand
You will also need to have the cash available to pay the settlements. Given the example above of settling a $7,000 debt for $3,500, you would have to have the $3,500 available to wire to your creditor or send in the form of a cashiers check. In fact, this is one of your most important negotiating points – that you would pay off the debt immediately.
If you don’t have the money
If you don’t have enough money to settle any of your debts or if you simply feel you’re not a good enough negotiator to pull it off, a better option would be to hire a debt settlement company. This way you would have a professional debt counselor who would negotiate the settlements far you. For example, our National Debt Relief counselors typically save our clients thousands of dollars on their unsecured debts.
What happens if you choose National Debt Relief
Once you contract with us, you no longer have to pay your creditors. You’ll send us a check each month. It will be deposited into a trust account and the money then used to pay your creditors once they agree to our settlement offers. Your money is safe with us because it’s deposited into an FDIC-insured trust account that only you can manage. We will also provide you with an affordable payment plan that will help you get out of debt in 24 to 48 months – depending, of course, on the size of your debt. This is as close to canceling your debts as possible.