FREQUENTLY ASKED QUESTIONS
Important facts you need to know about Debt Settlement
Q. Who is qualified for Debt Settlement?
A. Debt Settlement is only for people facing financial HARDSHIP. This means people who are late on paying their debts or have little or no ability to pay their debts, as structured, and could face potential bankruptcy.
Q. Who is NOT qualified for Debt Settlement?
A. Debt Settlement companies do not advocate that any person default on their debt. This program is not designed to negotiate debt for people who have reasonable means to pay off their debt. If you have the ability to pay your debt in the normal fashion, then you should honor your debt and do so.
Q. How do I apply?
A. Complete a form online. A debt consultant will review your information and call you to review your situation. After a debt consultant has reviewed your material and hardship, they will determine if you are qualified for the program.
Q. How will Debt Settlement settle my debts?
A. In a Debt Settlement program, you will be asked to put aside and save a set amount of settlement funds on a monthly basis. This amount will be determined in your initial analysis. In Debt Settlement, each person's situation is different and the negotiation process will begin at different times depending on the amount of your debt. Once the creditors agree to a settlement amount, the offer is presented to you. If you approve of the settlement, the creditor will be instructed to put the offer in writing so it can be executed. Debts can be settled two different ways; lump sum or a term settlement. One lump sum is just that, one payment and the account is paid. A term settlement is a settlement which is paid over an extended period of time until the account is paid.
Q. Is bankruptcy a better option for me?
A. Anyone considering a Debt Settlement program should consider also contacting a bankruptcy attorney to determine if their situation warrants filing for bankruptcy. A debt settlement program does not guarantee that you will not have to file for bankruptcy in the future.
Q. Does Debt Settlement have a negative impact on my credit?
A. In Debt Settlement, your credit score will continue to decline. How much it will decline depends on your original circumstances. Most of the accounts you place into negotiation are likely to charge off, which will reflect negatively on your credit. However, once this charged off debt is settled, the settlement is reported to the credit bureaus. After all debts have been settled and paid, the credit score should begin to improve since the negative items have been resolved. A high credit score is desirable to have, but if you have a financial hardship and are unable to pay your debts, then your first priority should be to get back on your feet financially by resolving your debt issue.
Q. Can I still use my credit cards?
A. All credit cards in the program will not be active and you will not have credit privileges. On a very limited basis, you may keep credit cards out for emergency purposes. A certified Debt Counselor can guide you on what is feasible and what is not.
Q. What will I pay for Debt Settlement services?
A. Debt Settlement usually requires a series of payments toward fees and the balance of debt stretched throughout the first year and a half or so of the program. All costs and fees are always fully disclosed and you will likely be required to sign for approval before you commit to their program.
Q. Does a Debt Settlement program guarantee that they will settle all of my debts?
A. NO. There is no guarantee that your creditors will negotiate with the Debt Settlement company or that your debts will be reduced. Results are more dependant on your performance, which is not under the control of any company. Just the same, to date good companies have had tremendous results.
Q. Can I be sued?
A. Your creditors have the right to recover their money, so yes, they can sue. But usually, the purpose of the lawsuit is to force a settlement on the matter. In our experience, most creditors would rather not go to the expense of suing and simply try to negotiate a settlement.
Q. Can Debt Settlements stop my creditors from calling?
A. Your creditors have the right to try to contact you in order to collect a debt. Debt Settlement companies cannot stop that. However, if your account is in collection status, collection agencies have to adhere to the FDCPA guidelines. These guidelines exist for your protection, they cover harassment, and Debt Settlement companies do have the resources to hold creditors accountable.
Q. Does Debt Settlements repair my credit?
A. No. As a consumer, if you have a debt in collections, the process of settling on that debt can be beneficial to your credit score, but no company can remove legitimate negative items from your credit. A settled and/or paid account is better than an unresolved delinquent account and your credit score should improve after successful completion of your program.
Q. Can creditors garnish my wages?
A. A creditor that is owed money can petition for wage garnishment in the States that allow it. However, this can be a long and expensive process for the creditor. If you are willing to work with your creditors, wage garnishment can normally be avoided.
Q. What are the tax consequences?
A. A creditor can report cancelled/settled debts exceeding $600 to the IRS and you would be required to report the same as income on your annual tax return. However, the IRS permits you to write off any "income" from cancelled debts up to the amount by which you were "insolvent" at the time. You need to consult your own tax consultant for advice specific to your situation.
Q. Can't I negotiate my debts with my creditors on my own?
A. Yes, you can. As a matter of fact, if you successfully negotiate a debt, it may cost you less in the long run than using professional services. You should note, however, that Debt Settlement can be a long and complex process. Professional Debt Negotiators have the skills and knowledge of how your creditors negotiate and they have many years of experience negotiating debt resolution programs. You don't have to spend all of the time and effort trying to negotiate with your creditors and you can rely on their experience to get the best program outcome possible for you.