Latest news with #creditors
CBS News
21 hours ago
- Business
- CBS News
How much credit card debt is too much for debt settlement?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Debt settlement can offer significant relief to the right person, but there's a point when your debt might actually be too much for this approach. Getty Images There's no question that credit card debt has become a major issue over the last few years, with the total amount of credit card debt nationwide now sitting at a staggering $1.17 trillion. That equates to the typical cardholder owing about $8,000 at a time when the average credit card rate is nearly 22%. But for many households, these figures aren't just statistics. They represent a growing financial burden, one that's making it harder to stay current on their monthly card payments. As a result, many of the people who are struggling to pay down their card debt are now opting to explore their options for relief. While there are numerous debt relief strategies to consider, debt settlement, also known as debt forgiveness, can offer significant relief by allowing you to negotiate with creditors to try and settle for less than what you owe. That approach can work well for some, especially when balances are high and repayment options are limited. There's a catch, though. At a certain point, your debt may actually be too large for settlement to be effective. So, how do you know when you've crossed that threshold? Below, we'll detail what to consider before going all in. Start tackling your high-rate credit card debt today. How much credit card debt is too much for debt settlement? There's no hard cap on the amount of credit card debt that can be settled. In theory, you can try to settle $5,000 or $150,000 in credit card debt. But in practice, once you hit a certain threshold — usually around $100,000 — the risks and limitations of debt settlement become more pronounced. Why does this happen? There are a few key reasons: Creditors are less flexible when the stakes are higher If you owe one creditor $30,000 or more, they may be less willing to settle, especially if they believe they can recover the full amount through a lawsuit or collections. The bigger the balance, the more motivated they may be to go after you through legal means rather than negotiation. Explore your debt relief options and find the right strategy now. You need enough income to fund a settlement Debt settlement typically involves stopping payments while you save up enough money to fund lump-sum settlement offers. But the more debt you have, the more money you'll need to save — and fast. If you're settling $100,000 worth of credit card debt, for example, you may need to come up with $50,000 to $70,000 in a matter of months or a few short years. For many people, that's just not a realistic goal. The fees can get steep With a high amount of card debt, it makes sense to work with a debt relief company on your settlements. After all, their negotiation expertise and creditor relationships may come in handy when trying to settle big balances. However, most debt relief companies charge fees of between 15% to 25% of the enrolled debt in return for the work they do. So, if you're trying to settle $120,000 in credit card debt, you could be looking at $18,000 to $30,000 in debt relief fees alone. That doesn't include taxes you may owe on forgiven debt. The timeline can stretch out too long Settling a small amount of debt — let's say $15,000 — might take 24 to 48 months. But if you're trying to settle $100,000 or more, you're probably looking at a program that lasts five years or longer. That's five years of missed payments, credit damage and potential collection lawsuits. So what's the ideal range? Debt settlement tends to work best for people with between $7,500 and $75,000 in unsecured debt who have already fallen behind on payments and don't have the income or credit to qualify for debt consolidation loans. Once your debt exceeds $100,000, settlement can still be done, but it may not be the most efficient or cost-effective option. What are the debt settlement alternatives? Debt settlement can be useful, but it's not the only option, and may not be the best first step. Here are some alternatives worth considering: The bottom line Debt settlement can be a powerful tool, and if you're carrying $10,000 to $75,000 in credit card debt and are already behind on payments, it might be worth exploring. But if your balances are soaring past the $100,000 mark, the math starts to work against you. At a certain point, trying to settle huge balances can leave you facing high fees and potential lawsuits, all with no guarantee of success. In those cases, other types of debt relief may offer faster, cheaper, and more permanent solutions. The key is understanding what's available to you and choosing the solution that fits your financial reality — not just the one that sounds best in theory.
Bloomberg
a day ago
- Business
- Bloomberg
China South City Creditors Mull Seeking Earlier Wind-Up Hearing
A group of bondholders of defaulted developer China South City Holdings Ltd. is considering to ask the court to move up the date of a wind-up hearing, now scheduled for August. China South City sent a restructuring proposal to the noteholders on June 25, but the creditors have not gotten on board, according to people familiar with the matter.
CBS News
2 days ago
- Business
- CBS News
6 debt management program warning signs borrowers should know
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Not all debt management programs are legitimate, and choosing the wrong one could lead to serious damage for your finances. JensIf debt collectors are calling you daily but you can't afford to pay off what you owe, the idea of enrolling in a debt management program can be pretty tempting. After all, these programs claim to help reduce your debt and eliminate the annoying (and often stressful) communications from creditors and debt collectors. Their messaging is everywhere, too — from radio ads during your morning commute to pop-ups while you're browsing online and even direct mail pieces that outline exactly how much you owe. And, in reality, many of the credit counseling companies that offer debt management programs can genuinely help you get back on track financially. Enrolling in a legitimate debt management program has helped millions of Americans negotiate with creditors to reduce interest rates and fees and create realistic payment plans. But while there are many honest companies trying to help, there are also some that are looking to exploit people who are already struggling, and in many cases, the predatory companies sound exactly like the legitimate ones. When you're overwhelmed by debt, it's natural to want immediate relief, but rushing into the wrong program can make your situation dramatically worse. So, to help you make the best decision for your finances, it helps to know the warning signs to watch for. Find out what strategies you can use to get rid of your high-rate debt now. 6 warning signs to look for when choosing a debt management program The following red flags could signal that the debt management program you're considering may not be the best choice for you: They guarantee results or instant debt relief If a debt relief program promises to slash your debt in half or erase it altogether with no consequences, it's time to walk away. A reputable debt management program will never guarantee specific outcomes because every creditor is different, and not all will agree to reduce your interest rate or waive your fees. Plus, true debt relief takes time. If someone claims they can make your debt disappear overnight, they're either misleading you or selling a program that's likely to hurt your credit or lead to default. Ask a debt relief expert about the options available to you today. They ask for payment upfront Federal law prohibits both credit counseling and debt settlement companies from charging upfront fees before services are provided. So if you're being asked to pay a large sum before any real help kicks in, that's a serious warning sign to take notice of. Legitimate debt management plans might include modest setup or monthly maintenance fees, but those are typically rolled into your monthly payment, and they should be clearly disclosed and reasonable. While it varies, the fees for debt management programs are usually under $75 to start and around $25 monthly. They dodge questions or won't explain the process Transparency matters. If a representative won't walk you through how their debt management program works, what it will cost, how long it will take and what happens if you miss a payment, that's a big problem. Any trustworthy credit counselor should be more than willing to explain the details, including how your payments are distributed to creditors and what happens if one of your creditors refuses to participate in the plan. They don't review your full financial situation A real debt management plan provides a tailored, not a blanketed, solution. So, before recommending anything, a legitimate credit counselor will take a detailed look at your income, expenses, debts and financial goals. If a program is pitched to you without this step — especially during a high-pressure sales call — it's probably not focused on helping you. It's more likely to be geared toward making money off your stress. There's no mention of the credit score impact Debt management programs can affect your credit, but not in the same way debt settlement or bankruptcy might. If a company says your credit score won't be impacted at all, though, that's probably misleading. You may see a temporary dip early on due to account closures or new payment structures, but responsible participation in a debt management program typically improves your score over time. A trustworthy program will be honest about this from the start. They push you away from other options In some cases, a debt management plan really is the best option. But in other cases, strategies like a balance transfer card, a debt consolidation loan or even bankruptcy could make more financial sense. Any credit counseling company that discourages you from exploring alternatives or suggests theirs is the only "safe" or "legal" way to get out of debt is showing its hand. Real financial guidance considers all the tools in the toolbox, not just the ones that generate fees. The bottom line Debt management programs can be a lifeline for people overwhelmed by high-interest credit card debt, but only if the program is legitimate and tailored to your needs. The wrong program could leave you deeper in debt, with damaged credit and fewer options. So before you commit, take the time to research the agency, read reviews, verify credentials and ask questions. A trustworthy program won't just promise relief. It will help you build a realistic, sustainable path toward financial stability.
CBS News
2 days ago
- Business
- CBS News
Debt settlement pros and cons: Is it right for you?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. If you're drowning under the weight of your high-rate debt, debt settlement could be worth considering, but you'll want to weigh the pros and cons first. Getty Images Picture this: You're staring at a stack of credit card bills but are only able to make the minimum payments on the accounts, which barely touch the balance. As a result, you're watching the interest charges pile up faster than you can pay them down. Sound familiar? It might. Millions of people find themselves trapped in this cycle every year, and the issue is only getting worse now that the average credit card rate is sitting near a record high. When this happens and the traditional credit card repayment strategies aren't enough, debt settlement often comes up as a possible solution. Unlike debt consolidation or balance transfers, which simply help combine multiple debts into one account and interest rate, debt settlement involves negotiating with creditors to settle for less than what you owe. It's a strategy that can cut your total credit card debt significantly, but it's also one that fundamentally changes your relationship with credit and can reshape your financial future in ways you might not anticipate. So, the question isn't whether debt settlement works. It does in many cases. The real question is whether the relief it provides outweighs the long-term consequences. Below, we'll examine what you need to know to determine that. Chat with a debt relief expert about your options now. Debt settlement pros and cons: Is it right for you? Here's a look at the pros and cons of debt settlement to help you decide whether this approach makes sense in your situation. Pro: You could pay significantly less than you owe The most obvious benefit of debt settlement is the potential to pay substantially less than what you owe currently to get rid of your credit card debt. Successful settlements often reduce debt by 30% to 50%, though results vary. So, if you owe $20,000 across several credit cards, a settlement might reduce that to between $10,000 and $14,000 before fees. For someone facing serious credit card debt issues, this type of debt reduction can be life-changing. Find out how to start the debt settlement process today. Pro: It could be a smart alternative to bankruptcy For those with overwhelming amounts of credit card debt, debt settlement can be a good alternative to bankruptcy. While both options damage your credit, bankruptcy appears on your credit report for up to 10 years, compared to seven years for settled accounts. Debt settlement also allows you to maintain more control over the process, and if successful, you can resolve your debt issues without going to court, liquidating your assets or dealing with a bankruptcy trustee. For some people, that alone makes settlement worth considering. Pro: It could be a path to faster debt resolution When debt settlement works, it can resolve your debt problems much faster than making just the minimum payments on what's owed. Instead of taking decades to pay off high-rate credit card balances, the average debt settlement process is completed within two to four years. This expedited timeline can help free up cash flow for other financial goals and provide psychological relief from the burden of long-term debt. Con: It could come with credit score damage Debt settlement typically involves you stopping payments on your accounts as you save up to fund negotiated settlements, which immediately damages your credit score. Delinquent accounts can result in negative marks that drop your score by 100 points or more, and this damage can impact your ability to qualify for mortgages, car loans or even rental apartments. Settling your accounts for less than what you owe can also have an impact on your credit score, and these types of negative marks remain on your credit report for seven years from the original delinquency date. During that time, any credit you do qualify for will likely come with higher interest rates and less favorable terms. Con: There is no guarantee of success While working with an experienced debt relief expert can increase your chances of success, there is no guarantee that creditors will accept the proposed settlement offers. Some creditors, particularly those who believe you have the ability to pay, may refuse to negotiate and instead pursue collection actions or lawsuits. That's why many debt settlement companies offer their customers access to legal service providers who can help navigate these issues. Most companies charge customers an additional fee for this service, though some offer it at no additional cost. That means you could end up with damaged credit and still owe the full balance. The process can also take years to complete, during which your debt continues to grow due to interest and penalties. And if the settlement ultimately fails, you may owe more than when you started. Con: There could be tax implications and fees Forgiven debt above $600 is typically considered taxable income by the Internal Revenue Service (IRS). If you settle a $15,000 debt for $7,500, you may owe taxes on the $7,500 difference. This "phantom income" can create an unexpected tax bill, especially problematic when you're already struggling financially. Settlement companies also charge fees, which typically range from 15% to 25% of your enrolled debt. So, on a $20,000 debt load, you might pay $3,000 to $5,000 in fees, reducing the actual benefit. The bottom line Debt settlement can provide relief for those facing overwhelming debt, but it's not a decision to make lightly. The credit damage can be significant and long-lasting, and there's no guarantee the process will succeed. Before pursuing settlement, it's important to exhaust other options and speak with an expert who can help you evaluate both debt settlement and all of your alternatives. That way, you can ensure that the decision you're making is right for your unique circumstances.
Bloomberg
3 days ago
- Business
- Bloomberg
Ergen Seeks Reprieve on EchoStar Debt as FCC Fight Comes to Head
Charlie Ergen has asked creditors to EchoStar Corp. and its pay-TV unit Dish Network Corp. for a reprieve on the company's debt, just days before a grace period on unpaid interest payments is set to expire, according to people with knowledge of the matter. EchoStar elected to stop paying $326 million of bond coupon payments last month after the Federal Communications Commission launched an investigation into whether the company was meeting its obligations for its wireless and satellite spectrum rights. EchoStar has said the FCC's threats have 'effectively frozen our ability to make decisions' and was forcing it to conserve cash.
