In a Nutshell
Are you interested in learning more about how to settle your debts in Hawaii? Follow the steps below to get started, and you’ll be able to ride the wave through the debt settlement process.
Written by the Upsolve Team.
Updated January 2, 2020
Hawaiian Airlines suffered from overwhelming debt and rose above it. You can too. Debt settlement is a method you can use to pull yourself out from a crushing wave of debt. Swirling in a sea of bill collectors, rising debt, and falling credit scores is enough to make anyone sick and tired of budgets. But if you live in Hawaii and still have some income or assets, a debt settlement program could lead you to calmer waters.
You can navigate debt settlement on your own or use a Hawaii debt settlement company to help your personal finances get back to solid ground. Debt settlement is not the fastest solution and it won’t immediately help your FICO credit score, but if you are considering bankruptcy or loan consolidation options, take time to explore the debt settlement option to see if it’s the right opportunity for you.
Debt settlement is a way to get out of debt that uses lump sum payment agreements to settle with creditors for less than the full amount owed. In a debt settlement, you pay a percentage of the debt. The remaining debt is forgiven.
The creditor will not be quiet until the full amount of the percentage is paid, and you will get collection calls until the debt is paid.
A simple scenario illustrates the basic premise of a debt settlement agreement:
Bank of Hawaii: “Here is a treasure chest of money you can borrow. I’d like the full treasure chest back. You can pay me monthly. “
You: “A volcano hit my house. I can only give you half a treasure chest. “
Bank of Hawaii: “Okay, we’ll take half a treasure chest back in five years and then we’ll call it even. Let’s write up a term settlement agreement. “
Unfortunately, it’s not that simple. Some credit card companies are easy to work with while others will give you a hard time. Student loans may be difficult to settle. Federal loans and private student loans require special treatment. You won’t have an easy time with secured debt. Debt settlement works best with unsecured debt and cautious negotiations. You and your creditor can negotiate an amount to settle your debt, or a Hawaii debt settlement company can negotiate the agreement for you. A “term settlement agreement” outlines the details of the payments.
If a debt settlement company is helping you manage your debt, a new bank account will be opened. This account is called an “escrow account.” The escrow account holds the money that is to be paid to the creditors for your debt. You can put your money in the escrow account all at once or you can make monthly payments. Reputable Hawaii debt settlement companies can help set up the escrow account and give you information on how debt settlement options affect your credit score.
Learn More Through Free Nonprofit Credit Counseling
If you want to learn more about debt settlement or consolidation, debt management plans, and bankruptcy, you can talk to a nonprofit credit counselor and it won’t cost you a dime. (First credit counseling session is free!) Credit counselors are trained in money management and are familiar with the techniques available to manage the business of your money.
The credit counselor will ask you a lot of questions about your living expenses, the outstanding balances on your debts, wages, and other income sources. Don’t be afraid to talk about your stash of money buried on Maui. Be upfront. A nonprofit credit counselor has an ethical duty to keep everything confidential, and they don’t report what they hear to the credit bureaus. The National Foundation for Credit Counseling (NFCC) requires its members to be accredited and have ongoing training. Once you meet with a nonprofit credit counselor and they review your unique financial situation, they will create and discuss a budget with you. They may let you know which debt finance option is best for you. Don’t be afraid to ask questions. Time with a credit counselor can be a valuable investment.
How to Settle Your Debts in Hawaii
Are you interested in learning more about how to settle your debts in Hawaii? Follow the steps below to get started, and you’ll be able to ride the wave through the debt settlement process.
- Collect Details About Your Debts
- Collect Details About Your Ability to Settle Your Debts
- Learn About the Costs to Settle Your Debts in Hawaii
- Decide Whether to Work with a Hawaii Debt Settlement Company
- Research Hawaii Debt Settlement Companies
- How to Make Your Debt Settlement Work
- Alternatives to Debt Settlement
Collect Details About Your Debts
You will need evidence to prove your debts and expenses.
Gather your bills and sort your debt and expenses into five categories:
Government debt (state or federal student loans, back taxes, etc.)
Secured debt (mortgage, auto loan, title loan documents)
Medical bills (hospitals, doctors, labs)
Unsecured debt that isn’t for medical bills (credit card debt, payday loans)
Necessary expenses (rent, mortgage, utilities, groceries, gas, childcare)
Add the total amount of debt for each category. Determine the monthly payment for each category and the interest rate for all your debts. Feeling overwhelmed? Take a break. It’s mentally draining to review a pile of expenses, but keep in mind that debt relief is good for your health. A 2019 study at a university social research center demonstrated that debt relief reduces anxiety and improves cognitive functioning. This study also suggested that three months after getting lasting debt relief, you’ll likely make better financial decisions.
If you have received complaints, judgments, garnishments, or other legal documents related to your debt, put those in a folder and plan to have a discussion with a nonprofit credit counselor and an attorney. These papers are important. There are laws that can help you and protect you. Finally, to make sure you’re not missing anyone, get a copy of your credit report. Under the Fair Credit Reporting Act (FCRA), the three major credit reporting agencies have to provide you with one free credit report per year, but they only have to provide the credit report if you request one.
Collect Details About Your Ability to Settle Your Debts
Once you have gathered proof of your debts and expenses, you can start gathering evidence about your ability to pay your debts. Start a folder for income and assets. Put in the folder a copy of last year’s income tax return and proof of your last eight weeks of wages. If you’re not working, put a copy of your most recent Social Security, Social Security Disability, Workers’ Compensation, TANF, lawsuit awards, or any other type of payment that could be considered income. Add to the folder a copy of your mortgage agreement and car loan agreement. Your house and car are assets. Add a recent bank statement for each bank account that has your name on it.
You may not use all of these documents during debt settlement calculations because there are laws regulating what is and what is not counted as for this process —but it’s best to put everything on the table when you talk to a nonprofit credit counselor, a Hawaii debt settlement company, or bankruptcy attorney. Add up your monthly income, then add up the value of your assets. When you meet with a nonprofit credit counselor, they will review your income and asset information with you. Your counselor will let you know what types of income are protected from creditors. For example, creditors cannot take your Veterans' Benefits or income from Social Security. The Federal Trade Commission has a list of federal benefits that are protected from creditors. Knowing what income sources creditors have access to will help you if you choose to talk to a Hawaii debt settlement company. If you have significant income and investments, make an appointment to talk with a bankruptcy attorney for advice.
Take a look at your numbers. You should have the sum of your total debt amount and expenses, and the sum of your total income and assets. Is the total of your income and assets higher than the total of your debt and expenses? Then you might be a good candidate for debt settlement. If your debt and expenses are much higher than your income and assets, you may want to consider filing for bankruptcy or contacting a bankruptcy attorney. You can always start with a nonprofit credit counselor if you are undecided.
Learn About the Costs to Settle Your Debts in Hawaii
Debt settlement fees in Hawaii may be a percentage or flat rate, but by law, they can only apply to debts that are settled. If you have ten accounts and only five are settled using a Hawaii debt settlement company, the company can only charge you for settling the five accounts. U.S. News and World Report reported on November 1, 2019, that it’s common for debt settlement companies to charge a 15% to 25% fee on the forgiven debt.
A Hawaii debt settlement company will open a new escrow bank account during the debt settlement process. Payments to creditors will be deposited into this account. The person that is managing the bank account to pay creditors may charge a fee for services and this cost could fall on you. The person managing the escrow bank account is called the “account administrator.” The escrow bank account set up for debt payments will cost money to maintain, and this will vary per bank. It could cost $250 or more per year. The American Bankers Association even reported it could be as high as $500 per year to maintain a bank account.
You may also have to pay taxes on the forgiven debt if you save more than $600. If you have substantial debt and you’re successful in settling with your creditors, your taxable income will be increased by the amount of debt forgiven.
Decide Whether to Work with a Hawaii Debt Settlement Company
The American Fair Credit Council reports that over two dollars are saved for every one dollar spent on debt settlement, and debt settlement efforts translate into a 30% savings on debt. Working with a Hawaii debt settlement company could be a wise investment. If you have a knack for negotiations, you can start the settlement conversations on your own. You do not have to use a debt settlement company to settle a debt with a creditor.
Debt settlement companies do have some advantages. They know the ropes of the business. They know which credit card companies will settle and which companies will put up a fight. The staff has a list of direct contacts and has learned how to craft a strategic winning proposition. They have the advantage of sharing settlement experiences and learning from everyone around them. They also have many clients. Your phone calls may not get returned. Your case may get shuffled to the bottom of the pile.
When you are negotiating with creditors on your behalf, you know the status of your negotiations. You also have the advantage of negotiating with creditors that have no interest in talking to debt settlement companies. You will not have to pay another company fees for negotiations, but you will need a lot of time to make phone calls, organize and maintain the records and bills, and evaluate debt settlement scenarios. If you have a family and a full-time job, you might not have the time. In that case, it might be worth the cost to have a Hawaii debt settlement company handle creditor negotiations.
Research Hawaii Debt Settlement Companies
Before you commit to divulging your vital and personal information, research potential Hawaii debt settlement companies. Debt settlement companies are regulated by federal and state law, but that doesn’t mean every company follows the law. Hawaii’s Attorney General Office has information on credit fraud. The Federal Trade Commission (FTC) has a list of banned debt relief companies. The Consumer Financial Protection Bureau has a searchable Complaint Database. You can also do an internet search for the name of the Hawaii debt settlement company you are interested in and just add the word “reports” or “complaints” to the search.
Debt settlement is often referred to as “debt adjustment.” However, in Hawaii, it is against the law to be a “debt adjuster,” except for certain people. Watch out for scams. After you review official government complaints and review Hawaii debt settlement companies online, call the companies and interview them. Ask them about fees, communication methods and standards, information required, types of debts settled, creditor negotiations, debt negotiations, interest rates, creditor offers, timely payments, late payments, late fees, mistakes, time to pay, locations, methods of payments, paperwork signing, credit ratings, risks, and options. Telemarketing laws require debt settlement companies to provide you with some of this information, even if they didn’t call you first.
How to Make Your Debt Settlement Work
Your debt settlement payment plans needs to be realistic. Your payments should flow regularly and on time. Before you commit to a debt settlement, go over the numbers multiple times and make sure you are providing for necessities. Don’t forget to count your yearly expenses. Monthly expenses like rent and utilities become habitual. It’s easy to forget that car insurance and car registrations can take a chunk of money out of your income at the most inconvenient time. Review your automatic debits. Go through your bank account and look at the automated deductions. Does the timing of your proposed payment date conflict with those debits?
Plan for emergencies. No matter how tight you are with money and how careful you are, emergencies happen. Simply driving a car to the grocery store puts you at risk for injury. Are you prepared to evacuate the island if there is a hurricane or tropical storm? Set aside emergency funds before you commit to your debt settlement plan.
Make sure you count your entertainment expenses. Are you going to make your monthly payment to a collection agency if it’s your child’s birthday and you’re strapped for cash? Be realistic about your holiday and family spending. Netflix? Count it or cancel it.
If you still have a credit card in good standing with available credit, save the card. It sounds contrary to the cheerleaders screaming “cut all the credit cards!” but a credit card in good standing can help with emergency funds, and it can help you reestablish your credit rating after your other debt has settled.
Alternatives to Debt Settlement
Debt settlement isn’t a great option if you don’t have the income or assets for lump sum payments. Also, your credit score will suffer, your wages could be garnished, and your credit cards could get cut off. Doesn’t sound like fun? Keep reading for debt alternatives.
A simple description of debt relief alternatives:
Debt consolidation: a new loan to manage old debts
Debt management: managing old debt without a new loan
Bankruptcy: no loan, no debt
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Hawaii Debt Consolidation
If your credit hasn’t been destroyed and your credit score is a concern, Hawaii debt consolidation may be a viable option. The debt consolidation technique simply takes all your current debt with its high interest rates and chunks them into one big new loan instead—hopefully with a lower interest rate. The advantage of debt consolidation is that your credit report will show that your debt is paid in full. In debt settlement, your credit score suffers because the credit report shows only a partial payment of debt.
Hawaii Debt Management Plan
If you have less than stellar credit but can make monthly payments, a debt management plan (DMP) may be a better plan for you than a lump sum debt settlement agreement or a loan consolidation. If you choose to use the DMP technique, you’ll meet with a credit counselor and work out a budget to manage your debt and expenses. Successfully negotiating lower interest rates with credit card companies lowers monthly payments. The credit counselor will help you make payment arrangements with your creditors, and you’ll put a plan in place to pay off your debt in a few years. The big disadvantage with debt management plans is that they deal with unsecured debt, but not secured debt.
Hawaii Bankruptcy
Consider Chapter 7 Hawaii bankruptcy if you have limited income and assets. As you may have heard, Bumblebee Tuna has filed for bankruptcy. If you’re swimming in debt, consider talking to a nonprofit credit counselor or bankruptcy attorney about your outstanding debt and Chapter 7 bankruptcy options.
A Chapter 7 bankruptcy in Hawaii is not instantaneous, but you’ll probably get out of debt faster than the billion-dollar tuna company. Your unsecured non-government debt could be completely wiped out after filing for a Chapter 7 bankruptcy. Your judgments could be erased, and wage garnishments would stop as soon as the case is filed. Unfortunately, government student loans are not discharged automatically. You also have the DIY option of filing a Chapter 7 Hawaii bankruptcy on your own, without an attorney—for free. And Upsolve may be able to help.
When you use debt settlement techniques or other debt options to get your life back on solid ground, whether by yourself or with a Hawaii debt settlement company, you are investing in your well-being. Your well-being is important to you and those around you. Keep yourself and your finances healthy. Deal with the business of your debt.
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Written By:
The Upsolve Team
Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.
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