FAQ of Debt Settlement

• Who is an ideal candidate for Debt Settlement?

  Someone who has some type of hardship such as (illness, disability, divorce, job loss or a reduction in pay) and is having a difficulty making payments on their unsecured debt. Someone who has past due credit card debt in excess of $6,000, with high interest rates and unsustainable payments such that the individual is considering filing bankruptcy. Someone with a debt problem that he or she cannot resolve. Someone that is having trouble staying current and are delinquent on their accounts or are receiving collection calls. Someone considering bankruptcy, but would like to avoid it.

• What is the difference between secured and unsecured debt?

  Unsecured debt is any loan or debt that has no tangible assets or property attached to it. The most common types of unsecured debt are credit cards, department store cards, medical bills, utility bills and personal loans. Should you fail to make timely payments, the lenders only recourse is to pursue legal action.

  1. Credit Cards
  2. Retail Store Cards
  3. Unsecured Bank Loans
  4. Medical Bills in Collections
  5. Personal Loans
  6. Repossessed Automobile Deficit Balances

  Secured debt is debt for which the creditor has collateral in the form of a security interest in personal and or real property. Should you fail to make timely payments on secured debt, the creditor is entitled to repossess the property and sell it.
  Please keep in mind that you may still be liable for any deficient balance remaining after the sale of the property. When dealing with secured debt, it is important to obtain advice from a licensed attorney in order to protect your interests.

  1. Taxes
  2. Student Loans
  3. Mortgages
  4. Car Loans
  5. Secured Bank Loans
• Is Debt Settlement the same as Debt Consolidation?

  No. Debt Settlement reduces the total debt by negotiating an agreed payoff. In Debt Consolidation you take out a loan to pay off your unsecured debt with secured debt.

  Debt Consolidation loans transfer the debt from one account to another and typically takes unsecured debts and changes it into secured debt (usually your home). If you do not have enough equity, bad credit or too much debt, it is not likely that you will be approved for a debt consolidation loan.

  Statistics show that about 70% of people who obtain a debt consolidation loan find themselves in deeper debt than they were originally in within a two year period. You cannot borrow your way out of debt. Ask yourself why you would want to go from an unsecured loan to a secured loan to be paid over a longer period of time?

  The main problem with consolidation loans is that once you have paid off the credit cards you have a whole new source of spending power: $0 Balance credit cards. Many people lack the discipline to avoid incurring any more credit card debt, leaving them in a worse financial situation. You end up having to pay back the cards but also the consolidation loan. Stop the cycle and rid yourself of debt!

  One more warning, if you start missing payments on the consolidated loan, you stand to lose the assets (usually your home) that the loan is secured against.

• What does the process of Debt Settlement look like?
  1. Go to annualcreditreport.com and print a copy of your free credit report
  2. Meet with a Debt Consultant in person or over the phone
  3. Prepare a monthly budget with your Debt Consultant
  4. Make a Debt Repayment Plan for 12, 24 or 36 months
  5. Set up a Trust Account
  6. Trust Account is in your name and under your control
  7. Schedule an appointment call with your Settlement Coach
  8. Receive your Welcome Packet
  9. Prepare financial materials to send to your Settlement Team
  10. Sign Limited Power of Attorney Letters and send them to Creditors
  11. Sign Cease and Desist Letters and send them to Creditors
  12. Get access online to your Trust Account to view 24/7
  13. Send your monthly payments to your Trust Account
  14. Fees are included with monthly payments to your Trust Account
  15. The Settlement Negotiations begin
  16. Stay in continuous communication with your Settlement Coach
  17. Approve all settlement agreements in writing
  18. At the end of your Debt Repayment Plan you are DEBT FREE!
  19. You receive a 0 Balance Letter / Settled Accounts from each Creditor to forward to the 3 credit reporting agencies
• How does Debt Settlement affect my credit?

  A debt settlement program will have a negative effect on your credit while in the program. It records as a ‘slow pay’. If your accounts are already delinquent it may not have much effect. Consumers with unpaid delinquent accounts, debt settlement makes an excellent option, considering the savings over paying the past due account in full.

  The question is, does debt settlement make sense for those who have current accounts, and a good credit rating? Those with a high credit score must weigh the negative impact on credit ratings against the risk of bankruptcy and the potential of being out of debt for less than the full balance. You should be advised, even if you accounts are current your credit score may already be negatively impacted by your total debt and debt available credit ratio; in this case negotiation of the accounts may still be a better alternative than making minimum monthly payments for the next 30 years and still having bad credit.

  When you complete the program your credit report will record as a 0 Balance Settled Account. Once your account balance and payment due is settled and reported as a zero balance, your debt to income ratio will be reduced as long as you have not incurred more debt. Low debts to income ratios typically have a positive impact on accounts and credit, particularly over the long term. The history of the delinquency may remain on your credit report, but the account moves from the current derogatory reporting section of the credit report, to the closed account section. As months pass any derogatory history has less and less bearing on the credit score. Some lenders believe that after 12 months the accounts are given very little consideration. It appears that provided all other debts are paid in a timely manner (house, car and other accounts kept current) the effects of the settlement process are temporary. However, debt settlement should not be used as a method of credit repair. Remember if you are considering Chapter 7 or 13 Bankruptcy it will stay on your report for 10 years.

• How do my creditors know I am in the program?

  In your Welcome Packet you will receive Cease and Desist Letters. Those letters contain the legal verbiage that is regulated by the FTC, Federal Trade Commission. It is supposed to ask your creditors to stop contacting you. I have personally sent one of those letters and the contact stopped that day. In addition the success of the program relies on being in constant communication with you throughout the program. That is why you have a Settlement Coach and a Settlement Team to support, guide and work for you.

• Do I have to put all of my credit cards into the program?

  No. Unlike bankruptcy you may leave one out for emergencies.

• Why would my creditors settle?

  Creditors current options are to sell your account to collections agencies. Those collection agencies buy your debt for approximately .20 cents on the dollar and try to collect the full payment from you. Creditors understand and participate in debt settlement programs. There are entire departments with all creditors for the purpose to settle debt. They work with professional organizations to settle accounts.

• Can I negotiate the debt myself?

  Yes, you can. But you will not achieve the same results or receive the most favorable terms. The same concept of buying in bulk that COSTCO or Sam’s Club uses everyday, when you are a member and shop their, you benefit from their volume bulk buy. In debt, your debt is not offered alone. Your debt can be bundled together in bulk with other debtors and offered to the creditor as a group. It is known as a ‘volume buy down’. You receive the benefit of a group discount.

  And you need to consider that creditors deal with thousands of people who are in financial difficulty every day and have a vast array of sophisticated methods of intimidating you into financial arrangements that are not in your best interest. The settlement process is usually very emotional and stressful, especially when you are the one being attacked by collectors over the phone. Most people prefer to leave these tasks to experienced people who earn their livelihood doing that particular kind of work.