Debt Settlement F.A.Q.
- What happens to my credit?
- How much does your program cost?
- Is this legal?
- What about the tax consequences?
- What about lawsuits?
- Can my wages be garnished?
- Can I do this myself?
- Can I still use my credit cards?
What happens to my credit?
Your credit score will decline during the program itself. How
much it will decline will depend on your
original circumstances. Some of the accounts you place into
negotiation are likely to “charge off”, which will reflect negatively
on your credit. However, once a debt is settled, the settlement is reported to
the credit bureaus. Settled accounts are positive compared to unresolved delinquent
debts or bankruptcy. After all the debts have been settled, the credit score
will begin to improve since the negative items have been resolved. In addition,
your debt-to- income ratio (an important measurement made by potential lenders
that is not always directly reflected in your credit “score”)
will greatly improve, since you will be debt-free. Of course,
credit is an important thing to have, but obviously your first
priority should be to clear up your debts and
get back on your feet financially.
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How much does your program cost??
Each individual’s financial situation
is unique and requires a unique program that is designed to meet
both thier long term goals and budget. With this in mind, the cost
of our program is determined by 5 main factors:
- How much money you owe to individual companies,
and in total.
- How late you are in paying your monthly minimums.
- Which companies you owe money to.
- How many companies you owe money to.
- How much you are able to save each month to pay off your debt.
Once we fully understand these variables we can then give you an accurate
estimate of what you will pay in our program. This is why we offer
a full debt relief consultation to all prospective clients. In the
consultation we assess your financial situation, your financial hardship
and then create a program that fits both your goals and your budget.
This consultation and analysis is free of charge and you are under
no obligation to join our program. The goal of the program is to have
you pay off your reduced debt for far less than what you owe today,
INCLUDING ALL of our costs to provide this service.
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Is it legal?
Definitely! You have the right to appoint a third party to
represent you in debt matters. While we are not attorneys and
we do not furnish
legal advice, our negotiators have settled debts with
the largest credit card banks in the nation on behalf of
clients for the past 8 years.
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What are the tax consequences?
Banks are supposed to report canceled debts exceeding $600
to the IRS and you are supposed to report
the same as income on your annual tax return. However,
the IRS permits you to write off any “income” from canceled debts up
to the amount by which you were “insolvent” at the time. So unless
you have a positive net worth, which is highly unlikely if you’re deep in
debt, then you ordinarily won’t have to pay taxes on
the forgiven amounts. You should consult your own tax advisor
for advice specific to your situation.
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What about lawsuits?
Lawsuits happen less frequently in debt matters than most
people think. Some
debtors fall behind, don’t make any payments for years,
and never hear from a single attorney. Of course, creditors
certainly have the right to sue you to recover their money.
But the purpose of the lawsuit is to force a settlement on
the matter. In other words, the creditor is just trying to
get paid. Accounts that have reached this stage can still
be successfully settled, provided the client has sufficient
funds at the time. Otherwise, most creditors are amenable
to renewed payment arrangements in such a situation. The
worst-case scenario is that a client might have to pay back
the balance in full on that particular debt.
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Can my wages be garnished?
A common tactic used by aggressive debt collectors is the
threat of wage garnishment.
If you’re already struggling financially, nothing is scarier
than the prospect of having money taken out of your paycheck
without permission. Collectors try
to make it sound like this will happen on your very next payday
if you don’t
send a check immediately. This, quite simply, is false. The
creditor first has to sue you, obtain a judgment, and then
file for a garnishment action. See Question
No. 5 above. If you’re willing to work with your creditors,
wage garnishment can normally be avoided.
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Can I do it myself?
Yes, however it takes a skilled negotiator with years of experience
to get the best reduction on your debt. You also lack leverage
with your creditors. If you owe just $20,000 to a creditor
why would they just allow you to only pay half? If you file
for bankruptcy they loose the $20,000. This is a very small
amount of money to them. For
our company we have a great deal of leverage because we can
offer many debts to them at one time. So for example we could
bring 10 debts equal to $200,000 to them. If all of these people
were to file for bankruptcy the creditor would be out $200,000.
On the other hand if they negotiate with us they will be able
to recoup at least a portion of the money due to them. Again,
this is just an example, but it demonstrates why we can be
far more effective compared to a do it yourselfer or even a
small debt negotiation company.
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Can I still use my credit cards?
No. All credit cards in the program will not be active and
you will not have credit privileges.
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