FAQ

1. Who qualifies for a Debt Settlement program?

Debt settlement programs are for people facing financial hardship. Debt settlement programs are for people whoare late on paying their debts, are struggling with their minimum monthly payments, or have little or no ability to pay their debts in the future and are possibly facing bankruptcy. This proactive approach is the most cost-effective option for people facing hardships including but not limited to:

  • Reduced income
  • Job Loss
  • Divorce
  • Poor money management
  • Underemployment
  • Medical Expenses
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2. How do you apply?

Call our toll free number to speak with a consultant or complete the form online. A debt consultant will review your information and discuss your situation with you. After a debt consultant has reviewed your financial situation and hardship they will discuss all your available options for handling the debt and determine if you are qualified for either a credit counseling or debt settlement program.

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3. How will my debts get settled? You will be setup with an affordable monthly payment in line with your income and expense budget and based on your total amount of debt. This payment amount is determined on a client-by-client basis between you and a debt consultant. Based upon what you are able to pay each month into your settlement account, we can determine how many months you will be part of the program, and ultimately be debt free. Your payments are put aside in your settlement account on a monthly basis. The debt settlement company will begin the negotiation process once you have accumulated enough settlement funds to make a reasonable offer to your creditors to settle the debt. Once a creditor agrees to a settlement amount, the settlement offer will be presented to you. If you approve of the settlement, the creditor will fax over the 'settlement offer' in writing. Finally, the negotiations department will arrange a three way recorded conversation with you, the creditor and negotiations department to settle the account. Debts can be settled in two different ways. They can be paid either in one lump sum or a term settlement paid over an extended period of time. The debt settlement company settles each of your accounts individually until all of your debts have been paid and you are debt free.

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4. Is bankruptcy a better option for me?

Filing for bankruptcy has serious consequences and should not be entered into lightly. Having your debts erased doesn't miraculously solve your long-term financial problems. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made major changes to bankruptcy laws, making it more difficult for many people to erase debts by filing for bankruptcy. These changes were prompted by years of complaints by banks and other financial institutions who believed that the bankruptcy laws had been abused by many consumers. Many people now will not be able to eliminate their debt by simply filing for Chapter 7. Many may now be required to file Chapter 13, which requires you pay back a portion of your debt under the supervision of the court. Filing for Bankruptcy, regardless of whether you file Chapter 7 or Chapter 13 will have long lasting negative effects on your credit history and public record for up to 10 years. The negative marks of bankruptcy on your credit may make it difficult to apply for future credit, secure jobs that require a positive credit profile, rent an apartment, purchase a vehicle, etc.

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5. Does debt settlement have a negative impact on my credit?

Your credit score will be negatively affected upon entering this program. The level of effect will depend on your original credit profile. If you are already delinquent on your accounts, a debt settlement program may not have much effect since the accounts are already reporting derogatory on your credit report. If you have delinquent unpaid accounts, debt settlement may be an excellent option to resolve the unpaid balances. If your accounts are still in good standing, debt settlement will have a temporary negative effect on your credit score. Your creditors will continue to report your accounts as "past due", "charged off", or "in collections" until the debt is settled. Settled accounts with a zero balance are positive compared to unresolved delinquent debts or bankruptcy. After all the debts have been settled and paid, your credit score should begin to improve since the negative items have been resolved. There are several factors used to determine your credit score including your debt amount, balance to limit ratio, payment history, length of credit history, and types of accounts. Although your payment history will be affected with a debt settlement program, your debt amount and balance to limit ratios will be greatly improved. As each of your accounts are settled throughout the debt settlement program you are then free to rebuild your payment history on your new or existing accounts and rebuild a solid credit profile. A high credit score is desirable to have, but if you are facing a financial hardship and are unable to pay your accounts, then your first priority should be to pay your delinquent debts and get back on your feet financially.

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6. Can I still use my credit cards if I use this program?

Any account that you enroll in a debt settlement or credit counseling program will no longer be active. This program is for you to get out of debt to get you back on your feet financially.

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7. What will I pay for Debt Settlement or Credit Counseling?

The debt settlement service fees are performanced based and charged once a settlement has been agreed too and paid to your creditor. The credit counseling fees are different on a state by state basis, which are based ontotal accounts, debt amount, and payments. Some companies may advertise as "non-profit" although that is not a guarantee that the services provided are free or even legitimate. Many companies recently have lost their IRS non-profit tax status due to abuses of their "non-profit" designation. Fees are always fully disclosed and you are required to sign for approval before you commit to any program.

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8. Can the creditors pursue legal actions against me?

Lawsuits are not common but your creditors certainly have the right to pursue legal action to recover their money. In our experience, most creditors would rather not go to the expense of suing and simply try to negotiate a settlement. The threat of lawsuits is a common tactic of aggressive creditors or collection agencies. The reality is that such action rarely occurs. It takes time and costs money to file a lawsuit and even more to collect on a judgment. A wage garnishment takes time, depends heavily on your employment, and may not even be applicable in your state. If you own a home it is difficult for a creditor to attach a lien to your home and your home may be protected by your state's homestead act. It is typically more cost effective for a creditor to settle on an account than to pursue legal action. Creditors realize that if they push you too hard they run risk of you filing for bankruptcy, in which case they often receive nothing.

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9. Can the Debt Settlement Company stop calls from creditors?

Your creditors have the right to try and contact you in order to collect a debt. For the first few months of the program you may still receive calls from your creditors inquiring about your accounts but the calls will eventually decrease or stop altogether. Debt Settlement Companies have been successful however in eliminating most harassing telephone calls. You have rights and protection under The Fair Debt Collection Practices Act (FDCPA) and the debt settlement companies client services department makes sure you are informed of these rights. If your account is in collections, collections agencies have to adhere to the FDCPA Guidelines. Under the Fair Debt Collection Practices Act:

  • Debt collectors may contact you only between 8 a.m. and 9 p.m.
  • Debt collectors may not contact you at work if they know your employer disapproves.
  • Debt collectors may not harass, oppress, or abuse you.
  • Debt collectors may not lie when collecting debts, such as falsely implying that you have committed a crime.
  • Debt collectors must identify themselves to you on the phone.
  • Debt collectors must stop contacting you if you ask them to do so in writing.
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10. Does a Debt Settlement or Credit Counseling program repair my credit?

NO. The goal is to eliminate your debt and does not engage in credit repair services. Negative items will remain on your credit report according to the conditions imposed by the credit bureaus. Settled accounts with a zero balance are positive compared to unresolved delinquent debts or bankruptcy. After all your debts have been settled and paid, your credit score should begin to improve since the negative items have been resolved. There are several factors used to determine your credit score including your debt amount, balance to limit ratio, payment history, length of credit history, and types of accounts. Although your payment history will be affected with a debt settlement program, your debt amount and balance to limit ratios will be greatly improved. As each of your accounts are settled throughout the debt settlement program you are then free to rebuild your payment history on your new or existing accounts and rebuild a solid credit profile

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11. Can my wages be garnished by my creditors?

Creditors have the right to pursue legal action and perhaps ultimately a wage garnishment to recover their money although it is rare and can be a long process for the creditors. The creditor first has to spend the time and money to file a lawsuit, successfully obtain a judgment, and then file for a garnishment action. In addition, a wage garnishment depends heavily on your employment, and may not even be applicable in your state. If you're willing to work with your creditors, any legal action, including wage garnishment can normally be avoided.

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12. Can't I negotiate the debt on my own?

YES, you can always attempt to negotiate your debts with your creditors on your own. However, the debt settlement process can be a long and complex process for the average person especially when dealing with multiple creditors. The debt settlement company has years of experience negotiating the most beneficial settlements for their clients. With a debt settlement program you don't have to spend all of the time and effort trying to negotiate with your creditors on your own and you can rely on their experience to get the best settlement for you.

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13. What are the tax consequences?

Your creditors may provide a form 1099-C for cancelled or settled debt exceeding $600 which you are required to report to the IRS. The forgiven debt may be reported as income on your annual tax return. This does not necessarily mean that you will owe taxes on the forgiven portion of the debt. The IRS permits individuals to legally exclude forgiven debt from their income through the "insolvency exclusion". This permits you to write off any forgiven debts up to the amount by which you were "insolvent" at the time. If your total debt and liabilities exceed the fair market value of all your assets, you would ordinarily qualify for the exclusion. We recommend that you consult your tax advisor for advice specific to your situation. They will also be able to assist you on filling out IRS Form 982 to get the exclusion.

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