Consumers researching debt settlement solutions need to be aware that there are two very different approaches to the strategy: the Long-Term Method or Fast-Track Debt Settlement™ (pioneered by ZipDebt). We might also call these “Slow Torture” or “Fast Relief.”
The Long-Term Method is where you start the project with nothing to work with – no nest egg, no stocks or savings, no IRA, no family assistance, no assets to liquidate, and so on. You have hope and that’s about it. When your only financial resource is your paycheck, the source of settlement funds is limited to the stream of cash previously associated with the minimum monthly credit card payments, now diverted to a set-aside account for settlements.
Since the pace at which funds build is slow, it’s usually only possible to settle ONE ACCOUNT AT A TIME. This will go fine for a while, but eventually the ones you haven’t settled will escalate out of control. Once multiple lawsuits kick in, the project gets derailed and you’re right back to the bankruptcy conversation all over again.
Fast-Track Debt Settlement™ means starting the project with some financial resources, such as a 401k loan or a private loan from a family member. Supplementing lump-sum funds with additional monthly savings from the household budget allows you to take advantage of multiple settlement opportunities as the accounts reach their respective charge-off deadlines. The whole point of this approach is to SETTLE QUICKLY and AVOID LAWSUITS.
If you’ve shopped debt settlement solutions, you know that most of these companies still talk in terms of 36-48-month programs – “Slow Torture,” in other words! This is pretty crazy from my perspective, since I’m the person who invented the 36-month settlement program in the first place! I abandoned it long ago as no longer effective.
Things change. Debt settlement companies, apparently, do not, so they still quote 3-year programs knowing full well that most of their clients will see multiple lawsuits if they take that long to settle. The odds of litigation climb sharply in the second year of collections. There is also risk during the initial 12-months, but it’s typically a risk that can be MANAGED, compared to risk that is OUT OF CONTROL.
Fast-Track Debt Settlement™, or “How to Get Out of Dodge Before the Shooting Starts!”
Here are the key reasons why you want to settle inside the 180-day charge-off deadline (or shortly thereafter) whenever possible:
1. Mechanical settlements – Most of the major credit card banks have automated processes in place that are designed to present settlement offers to customers. These processes are in operation through the charge-off deadline and beyond.
2. Improving offers – The settlement offers presented by bank collection reps tend to improve (i.e., decrease in required settlement percentage) as the account winds its way toward charge-off.
3. Fewer collection agencies – The fewer collection agencies involved, the easier the project becomes for the average consumer. While there may be third-party collection agencies involved in this early phase, most creditors work their accounts using internal reps up to the charge-off deadline.
4. Limited lawsuit risk – Risk of getting sued before charge-off is limited to certain specific creditors on larger balances. The risk of lawsuits is therefore much more manageable during the initial 6-month period.
5. Better predictability – Most of the major credit card bank settlement practices are pretty well established, and therefore predictable within certain limits. After charge-off, things get much less predictable, and virtually ANY account is at potential risk of litigation if enough time lapses without settlement.
6. Better settlements – Settlements negotiated directly with the creditors before charge-off are nearly always at or below 50%, with this being an upper boundary. In 2012-2013, we saw most of the major creditors settling in the 30-40% range, and one or two down in the 25% bracket. These are simply better deals (negotiated with less hassle) than are usually available via many collection agencies – especially when aggressive attorney collections are taken into account.
When you settle your debts on a Fast-Track™ basis, all the negotiations are conducted in parallel and as many of the settlements as possible concluded before the charge-off deadline. (Bear in mind that settlements often involve installment payments that extend 1-2 months beyond the deadline.)
There can be one or two very stubborn creditors who choose not to offer a reasonable settlement figure before charge-off, so the above guidelines do not apply 100% of the time. However, any accounts not resolved before the deadline can usually be settled within 3-6 months after charge-off, putting the whole project within a 6-12 month timeframe depending on the specific creditors involved.
OK, let’s review:
* You can file Chapter 13 bankruptcy and restructure the debt under a 5-year court-supervised plan where you pay monthly on a fixed pace.
* You can take the Long-Term Method and stretch out your settlements over 3-4 years, and get sued into Chapter 13 bankruptcy anyway.
* You can adopt the Fast-Track Debt Settlement™ strategy and be debt-free in 12 months or less.
Rather a “no-brainer,” isn’t it?