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1. What is the purpose of a debt settlement program?
A. To resolve your debt at a manageable cost. The goal of a debt settlement program is to negotiate mutually agreeable settlements between you and your creditor(s) eliminating any unsecured debt(s) described as Enrolled debts. Results cannot be predicted or guaranteed.
2. What responsibilities will I have as your client?
A. As a client, you will be responsible for forwarding any correspondence from your creditors or collection companies to us, for saving the appropriate amount set in your budget at the beginning of the program. Also, you will be responsible for accepting or denying any offer from creditors or collection companies, and to make a payment to the creditors or collections once a settlement is reached. You and only you will be in control of all settlement funds. Under no circumstances will your debt settlement company have custody or control of the funds you set aside to fund debt settlements
3. How should I budget?
A. You should sit down, concentrate real hard and map out every little expense that you have, then, cut down all costs so that you maximize your savings, and reduce the program length.
4. Where do I find information about the program such as the savings plan, monthly savings, and other information about the program?
The savings plan you are expected to follow will be detailed in your Client Agreement. Summaries of the total settlement amount, monthly savings, and the period needed to reach your goal will be prepared based on the goal you select. Those summaries reflect the minimum amount that your debt settlement company has estimated, you will need to save to put yourself in a position to reach your goals. Actual settlement amounts, necessary savings and the period required to reach your goal may vary based on creditors actions and other factors.
5. How do I know that all my creditors will work with you?
A. If your creditor declines to work with a us, we offer all our consumers a money back guarantee. Although some creditors will deny that they work with settlement companies, most creditors and collectors negotiate with debt settlement companies. Debt settlement companies cannot force the negotiations and cannot force creditors to accept a settlement.
6. How is the payment made to my creditors or collection companies?
A. After reaching a settlement with creditors or collection companies, and to prevent negative markings on the credit report, such as 3rd party pay from consolidation programs, the payment is made by the client from their personal bank account. Debt settlement companies do not make regular monthly payments to your creditors. We get negotiate the absolute best settlement for you. The reason for this is due to the fact that we are collectively negotiating thousands of accounts on a daily basis.
7. What can I expect from creditors and collectors trying to contact me?
A. As your debt moves thru the collection period, (about 30 to 180 days
late) calls will increase and original creditors do have the right to call you and continue collection efforts on delinquent accounts while you are enrolled in a debt settlement program. Such collection efforts can include phone calls and letters to you, charging off the account, sending accounts to collection agencies or attorneys, lawsuits and even garnishments of your wages if a judgment has been obtained. Debt settlement companies should not claim that they will be able to stop these collection activities as these activities may continue while the company is making its best efforts to negotiate your debt. However, phone calls from a 3rd party collection companies can be stopped.
Ask us about a phone module that we can provide, to help minimize your phone calls.
8. How long does the debt settlement program last?
A. The average consumer’s program length is usually around 36 months. However, debt settlement programs may vary depending on various factors, generally the clients conditions such as: (a) your financial hardship, (b) the age and balance of the accounts that you owe your creditors, (c) the funds you have available to pay for a settlement and (d) the willingness of individual creditors to enter into debt settlement negotiations. While no guarantees can be given, generally the quicker you save money the sooner you will be in a position to reach your goals.
9. What do the debt settlement company’s fees cover?
A. The fees are intended to compensate for its efforts, earned in the manner described in the Client Agreement. It¹s very important to add that debt settlement program fees are not being set aside or held in escrow to fund debt settlements. The fees allow us to do all the work for you.
10. When does the debt settlement company start communicating with my creditors or collection companies?
A. The communication process is handled on a case-by-case basis. In some instances creditors may not be contacted until several months after you enroll. By forwarding all your statements as efficiently as possible, we can handle your case in a more timely manner.
11. What about my credit rating?
Upon enrolling in a debt settlement program, you are stating that, because of circumstances beyond your control (hardship), you are unable to meet the minimum payments required by your creditors. If you do not make required minimum payments to your creditors, you may be breaking the terms of your agreements with them. Your actions will probably be reported to consumer reporting agencies as late, delinquent, charged-off or past due balances. Your creditor may also raise the interest rate on your account and impose other penalties. Your account balance may continue to grow as your creditor adds accrued interest, late fees, over limit fees and penalties. Your balance may continue to grow until a settlement is reached with your creditor; and, if negotiations are unsuccessful, you could be called upon to pay the entire balance. After settlement, your creditor may comment that the account was ³settled for less than the full amount on your credit report. A Debt Settlement Program may have an adverse effect on your credit report and credit score.
12. Do I have to pay taxes on the amount I save on each of my settlements?
When savings are $600 or more of what you owed, they may be reported by your creditor to the IRS as Discharge of Indebtedness income. You may wish to consult your tax advisor to determine whether your individual circumstances may permit you to exclude such Discharge of Indebtedness Income from your reportable income due to insolvency. For more information you may also consult a CPA or Tax Attorney and to refer to the IRS website www.irs.gov IRS Publication 908- ³Bankruptcy Tax Guide² and IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness available on the IRS website.
13. Can a debt settlement company represent me in court or provide legal advice?
No, debt settlement companies are not law firms and cannot provide any legal service or give legal advice.
14. What about lawsuits? Will your program stop legal action against me?
In our experience, only small minorities of consumers are involved in lawsuits; however debt settlement companies’ can¹t stop law suits. Creditors have the right to use legal means to collect a debt. Some creditors are more likely to file suit than others. It is a common tactic of third-party creditors or collection agencies to threaten you with a lawsuit (which is illegal if they do not intend to sue). Third-party creditors or collection agencies sue less frequently than original creditors. While we cannot guarantee that legal action will not be taken, we are confident that our experience in dealing with creditors can reduce the possibility of this happening. Despite any legal action that may or may not be taken, your account can be settled before, during or after the suit. Just because an account goes to legal action does not mean that we cannot settle it. The threat of legal action can be the scariest of all. IT CAN BE HANDLED. Sometimes a single lawsuit is not a bad thing because it may give our negotiators leverage to settle your other accounts. We recommend that our clients seek competent legal counsel in certain situations
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