Debt settlement is one of many ways you can get a handle on your debt. But as you consider your options, it’s important to avoid falling for common myths that could wind up hurting your financial situation and your credit history. At O1ne Mortgage, we are committed to helping you navigate these challenges. Call us at 213-732-3074 for any mortgage service needs.

Myth 1: You Can’t Do Anything Once Your Debt Goes to Collections

If a creditor has sold your debt to a collection agency, you may worry that you’re at the mercy of the debt collector. But even if the agency employs aggressive tactics, you have options:

• Verify the debt: Before you take any other steps, it’s important to confirm that the debt belongs to you. It’s not uncommon for debt collectors to take action based on outdated or erroneous information. Debt collectors are required to provide you with information about the debt. If you want more information, you can send a debt verification letter, forcing the agency to verify the details.
• Consider settling: Collection agencies buy debts for a fraction of their original value, so it’s possible to settle for less than what you owe. Consider whether you can pay in full or if you can inquire about an affordable payment plan. Then, make your proposal to the agency.
• Send a cease and desist letter: If you find that the debt is time-barred—beyond the statute of limitations—or you believe you’re being harassed, you can send a cease and desist letter to the agency. Debt collectors are required by law to obey these letters.

Myth 2: You Can’t Negotiate Your Debt Yourself

Some debt settlement companies may claim they’re uniquely qualified to negotiate a settlement with your creditors, but that’s not true. As the borrower, you have the right to contact and try to negotiate with the creditor on your own.

Doing so could save you thousands of dollars while achieving the same goal. Of course, it can take time and effort to gather information about your financial situation, communicate with debt collectors, and negotiate a settlement. There’s also no guarantee that the collection agency will be willing to work with you—but that’s also true if you hire a debt settlement company or law firm.

That said, if a collection agency has filed a lawsuit against you, it’s a good idea to consult with an attorney.

Myth 3: You Have to Pay Upfront for Help

If you do enlist the help of a debt settlement company, you may be asked to pay upfront for its services. However, federal law prohibits debt relief companies from charging upfront fees.

If a debt settlement company tries to charge you money at any point before settling a debt, it could be a scam. Contact the Federal Trade Commission and your state’s attorney general to file a complaint.

Myth 4: Bankruptcy Is a Faster Way Out

If you’re feeling overwhelmed, you may be tempted to pursue bankruptcy as a way to get out of a sticky situation. But filing bankruptcy may not have the impact you think, and it can limit your options even more than they already are.

For starters, there are many debts that are difficult or even impossible to discharge in bankruptcy, including secured debt like auto and mortgage loans, as well as student loans, court-ordered alimony and child support, and taxes.

Also, depending on the type of bankruptcy you choose, the process can take several years, and a bankruptcy remains on your credit reports for up to 10 years, limiting your access to credit in the future.

Myth 5: You Don’t Have Other Options

If you’ve missed several payments, you may be wondering if debt settlement and bankruptcy are your only choices. At this point, your credit may be in poor shape, at which point debt consolidation may be too expensive to make sense.

Before you make a decision, consult with a credit counselor, who can evaluate your situation and provide some advice on the different options you have, often at no cost. Depending on your situation, you may also be able to get on a debt management plan (DMP).

With this approach, the credit counseling agency could negotiate lower interest rates and monthly payments on your unsecured debts, such as credit cards and personal loans. There are some fees involved, though, and a DMP typically takes three to five years to complete.

Check Your Credit to Better Understand Your Options

Debt settlement can negatively impact your credit score, but depending on how far behind you are on payments, your score may have already suffered some damage. Check your credit score and credit report to evaluate your credit health, then research your options based on where you stand. If you’re not sure how to proceed, find a credit counselor who can help you.

Contact O1ne Mortgage for Expert Mortgage Services

At O1ne Mortgage, we understand the complexities of managing debt and are here to help you find the best solutions for your financial situation. Whether you’re looking to refinance your mortgage, consolidate debt, or explore other financial options, our team of experts is ready to assist you. Call us today at 213-732-3074 to discuss your needs and take the first step towards financial freedom.