What Qualifies You For A Debt Reduction Program?

debt reduction

Many people run into the debt with no idea of where to go for help. Debt reduction might seem quite farfetched to them. To reduce debt, you have to make the decision that you want to take this approach. However, it is in your best interest to do so. In fact, it will help you to stick to a budget and get your finances in order.

Negotiating Process

Not all individuals are qualified for a debt reduction program or debt settlement. Why? These kinds of debt relief strategies are aimed towards negotiation with collectors and creditors, agreeing to specific reduction terms to collect the outstanding balance. The process also involves convincing creditors to accept a specific amount. This is going to require some serious negotiations.

Qualified Debtor

The debtor has to prove financial hardship and ability to pay only that specific amount. The creditor does not have to agree to the negotiation. For that reason, there is no assurance as to the amount that the creditor will accept in the end. At times, the creditor will refuse to cooperate with the debtor in a debt settlement and so most debt settlement companies have certain guidelines and eligibility requirements to ensure that they are representing a qualified debtor.

The Qualification

How do you know whether or not you qualify for a debt reduction or debt settlement program? How can you determine whether or not the creditor will accept your negotiated terms? First, your debt has to be either:

  •       Unsecured loans
  •       Store cards
  •       Credit cards
  •       Credit union loans
  •       Unpaid medical bills

 

If you have secured debts, you won’t be able to settle. In most cases, when collateral is present, the creditor will repossess the collateral, if you default on your loan. This may include a car loan or real estate property finance. In some cases, it is a court ordered debt such as child support. If it is a student loan or tax repayment, you won’t have any luck in settling either.

The Amount of Debt

Your debt has to amount to more than $7,500 to be considered for debt settlement. If you were to owe less than $7,500 and you are past due a month or two, there is no motivation for your creditor to negotiate with you. Creditors would prefer to continue the harassment, calling your phone in hopes of collecting what you owe.

 

Taking Action

If you do owe the qualified amount of $7,500 or more, a debt settlement company will evaluate the extent of which you are in a financial hardship status. If you exhibit financial distress and not just trying to avoid paying a creditor, then you will go to the next step of the debt reduction program. This means that the debt settlement company will actively represent your case to the creditor.

 

Debt reduction is for people that cannot genuinely afford to pay a creditor and have fallen behind substantially in making payments. It is for the person who does not want to file bankruptcy, but find other means to work on their financial issues.