Debt consolidation statistics show that Americans have a long history with debt, while veterans and military personnel are no exception. The studies show that military personnel generally carry more personal debt than civilians, with a quarter of military personnel with credit card debt owed of $10,000 or more, compared with only 11% of civilians. Other debts common among military personnel are mortgages, auto loans and education loans. Veterans were once civilians who also have debt issues. In order to receive help, a settlement company or firm can help to negotiate the debts.
A credit counselor will meet with an individual to get information on their financial history and then set up a settlement plan. Individuals are then instructed by the credit counselors to set aside a certain amount of money each month. After a person has reach a certain amount of savings, the credit counselor will contact the creditors to begin negotiating on your behalf. The counselor does charge a fee to manage the debt management problem and disperses the funds each month, with a fee that will vary between creditors. Negotiations are based on getting all of your creditors to accept less than the full amount that people originally owed. Creditors will also be asked to dismiss the remainder your a debt. Once creditor negotiated transactions are complete, creditors are satisfied that a debt has been paid and not owed anymore by you.
Veterans have laws to help them out of debt.
For example, Veterans are protected from paying any more than 6% interest on credit cards, they can cancel leases without any penalties, and they can not be foreclosed on. However, if they do have any outstanding debt, it is carried over into their service history.
How are debts negotiated by Veterans?
The good news is that Veterans can negotiate their privately owed loans. They can also settle debts or loans that are specific to the government, such as:
- Air Force Federal Credit Union credit cards
- Auto loans for veterans
- Chase military credit cards
- Credit cards granted by credit unions
- Navy Federal Credit Union credit cards
- Visa Veteran Tickets credit cards
The Department of Veterans Affairs offers many programs and loans to their employees. But, due to unforeseen circumstances in working for Uncle Sam, Veterans can get behind in their payments. Veterans no longer need to look for help from outside firms or debt settlement companies, they can get help from the VA Debt Management Center (“DMC”) VA debts can include home loan guarantees, auto loans, educational loans, and overpayment of benefits, as well as other types of government loans. Good news for Veterans, is that they can take on consolidated loans that are supported by the VA because the terms of the loans are better, more foregiving for Veterans and they contain lower interest rates. A consolidated loan by the Department of Veterans Affair consists of:
- Taking out a second mortgage.
- Expand or refinance your existing mortgage.
- Take out a personal loan.
- Transfer balances to a low-interest credit card.
To consolidate loans through the Department of Veterans Affairs, Veterans must refinance their mortgage with a cash-out option which is a type of refinancing an existing mortgage, that can now be backed by the VA. As with other loans through the VA, the administration will serve as a co-signer in order to guarantee the loan.
Debt Settlement for Veterans
Debt settlement also works for Veterans because the VA debt management reduces the amount of money owed, even if the debt is a student loan or mortgages secured under a VA arrangement. Another debt relief system offered by the Department of Veterans Affairs, is called the Servicemembers Civil Relief Act (“SCRA”). The SCRA assists active members of the military and their families, in dealing with their debts and financial obligations. Congress passed the Servicemembers Civil Relief Act in 2003. The SCRA provides a lot of financial protection for individuals entering or called to active duty in the military, as well as currently deployed service members.
Debt Management Center
The debt management VA collection center- Debt Management Center (DMC) was founded in the middle of 1975. It’s primary goal was to collect debts owed by active service Veterans, in an efficient and cost-effective manner, while maintaining compassionate, high-quality service to veterans and their families. Veterans, family members, and active members who have incurred debts due to their activities in the government’s pension fund, VA compensation, home loans, and education programs. The DMC is in charge of the Veterans Benefits Administration’s whole collection process. The VA Debt Management Program provides its services on a “fee-for-service” principle for active Veterans. Under the SCRA and offered by the DMC are health and life insurance benefits, housing benefits and education benefits afforded to spouses.
When Veterans get behind in their payments to the Debt Management VA department, the DMC will send out letters notifying them of their rights and their obligation to reimburse the Department of Veterans Affairs. Veterans can contact the DMC and request a “waiver,” which means that they are submitting a request to end all collection actions on a debt. A waiver agreement called the Financial Status Report form must be applied for through a written letter from the active duty member, explaining why they want to apply for a waiver and why they feel that they should not be responsible for this debt or why paying for this debt would create a financial hardship. In addition to the waiver, Veterans can request an oral hearing, where military men and women would present evidence, stating why they need a waiver.
There are different waiver request timeframes for Vets to submit their request. Waiver requests depends on the debt that Vets are asking to be released from, such as education, pension, disability, or loan guaranty debts. Waiver timeframes vary between 180 days to one year from the date that the Vet was originally notified of their debt payment. A good benefit for Veterans who are approved for a full waiver, includes the fact that they will not be required to pay the amount that was approved. If Vets are only partially approved for a waiver, then they can appeal and/or contact the VA Debt Management Center to make arrangements to pay their debt. Additional options are also available for Veterans in debt clearance, which consists of a “compromise offer.” A compromise offer means that the government can accept a lesser amount of the monies owed as a full settlement of their debt.
A compromise offer is first appealed and viewed by the Debt Management VA’s Committee on Waivers and Compromises, who will decline or accept a Veteran’s request. The VA.gov website shows the different payment plans, which includes payment via ACH Debit or plastic card, pay by phone, pay online, pay by Western Union, pay by mail, or pay by a money order. The VA Debt Management Center also accepts monthly payments that have been worked out with the DMC. A last payment option to help Vets defray debt costs is through any monthly benefit check that they receive from the VA.