What effect will this have on my credit scores?

   Yes, debt settlement does have a negative effect on credit scores, but the type of credit card debt most qualified candidates are carrying has already created a negative credit score. Debt settlement can decrease your FICO score 100-120 points or more. However, debt relief is the goal, not maintenance of FICO scores. Once clients are debt free, coupled with elementary efforts to open new trade lines and follow best financial practices, they can effectively rebuild credit scores over a 12-48 month period. The FICO score is often compared to a snapshot of ones financial life and it is not etched in stone; it is fluid meaning it can change for the positive once one gets out of debt. Debt settlement is a very aggressive program but it is also very cost effective. The goal is not just to get out of debt but to achieve financial stability partly by not wasting time and money trying to get out of debt in a system of compound interest that is designed to make the feat nearly impossible. If someone is making only minimum payments and every month is a struggle as their overall debt amount is not getting smaller, the sooner they realize and accept the reality of their situation get pro active and make the decision to get out of debt, the better. 

Are there any fees?

   Litigation attorneys regularly charge up to 33% for winning a case through a plaintiff settling or motion practice. Fees can be as high as 40-50% (depending on the state) for winning a case in court. Our service consists of the same negotiation process required for motion prcatice in litigation practices, yet we charge only a fraction of the fees.

Will there be a lawsuit?

   Lawsuits are always a possibility. Creditors are assured of that right when they are owed money in order to seek repayment. However, our firm knows how to keep lawsuits to a minimum through debt negotiation, both before and after a summons might be issued. Litigation is costly and risky for both parties, our goal is always to settle them prior to a court date.

Is debt settlement prohibited in the United States?

    Debt settlement companies, much like many other products and services, are prohibited in certain states.  Certain types of mortgage programs and credit card interest rates are also illegal in certain states as each state law is different. That does not mean the process of debt settlement is bad. Debt settlement is a business tool that is centuries old in practice.

Can I deal with credit card companies by myself?

   Credit card companies are in business for one reason: to make money. By charging consumers high interest rates and hidden fees, they ensure profit. Their goal is not to help people. Consumers can usually only communicate with one branch of their creditors: the in-house collections department. We work with the Loss mitigation department, which in many cases the public is not allowed to speak with. Loss mitigation is the department that oversees short sales in real estate, as well as debt settlement of unsecured debt.

If I do nothing, will my problems go away?

   Doing nothing is not an option for most people. In some cases when your income is considered "untouchable" and you have no assets, then, with few exceptions, you are considered “judgement-proof.”  That is, even if your creditors get a judgment against you, they will not be able to garnish your wages (all your income is protected) and they will not be able to file a lien on your property (you have no property subject to a lien).

But what if I do earn a regular paycheck and have some assets, can I still do nothing?

   You can elect to do nothing if you choose, though it will eventually catch up with you. Creditors will obtain legal judgments against you and they can begin garnishing your wages and putting liens against any property you might own. If you have property that can be obtained by creditors, taking definitive action is in your best interest.

Okay, I want to do something about all this debt, but I can’t afford to even pay off the interest every month. What can I do?

   Depending on your financial situation, it may be in your best interest to just pay the whole debt off, but at a reduced interest rate and over an extended period of time. This is what’s called “Debt Management.”  Usually, clients do not have the funds to pay off their debt in full, which is why they are in the situation they are in.  So, Debt Settlement would be the best option for them.  Our experienced debt negotiators work with your creditors to work out a payment plan that will eventually satisfy the entirety of the debt.

How is debt settlement different from credit counseling?

   With debt management or credit counseling (same concept), you are paying off the entire debt over an extended period of time but at a lower interest rate. With debt settlement, an experienced debt negotiator attempts to lower the amount owed to the creditor so that you can pay it off. With debt settlement, money is saved up in your trust account and then your negotiator offers that amount to your creditor in hopes that the creditor will eliminate the entire debt for that amount.

How much is my debt reduced through debt settlement?

   There are literally dozens of factors that will influence how much your debt can be reduced or even whether or not creditors will settle in the first place. How much you owe, how long since you’ve last made a payment, how much you earn, who the creditor is, how the creditor is doing financially at that time, etc.  Because these factors can change day-to-day, it’s impossible to make any guarantees regarding how much debt can be settled.  Don’t be fooled by any company that makes guarantees regarding how much your debt can be reduced.

What does it mean to be bankrupt?

   Bankrupt is a legal term used to describe someone who is legally insolvent. In more casual language, it means you are unable to pay your debts as they become due. Upon a voluntary petition (or, less frequently, a petition by creditors), you can ask a court to find that you are legally insolvent and be protected from creditors. There are six chapters of the bankruptcy code, located in Title 11 of the United States Code. For the vast majority of consumers, only two chapters are important to understand – Chapter 7 and Chapter 13.

What is Chapter 7 bankruptcy?

    Chapter 7 is a “liquidation” bankruptcy.  If you qualify under Chapter 7, an appointed Trustee will liquidate, or sell off, all of your non-exempt assets. The money made from the sale of those assets is used to pay creditors off. The sale and payment to creditors will satisfy the entirety of your debt regardless of how much the creditors actually receive. If you have no applicable assets to sell, then there will be little or no money at all going to the creditors and it still discharges all of your debt.

   Chapter 7 liquidation does not mean the trustee will take everything and sell it. For instance, you are allowed to exempt your home, some personal property, some insurance benefits, and most of your wages. One way to think about it is if you depend on it to live, you can probably exempt all or at least a significant portion of it.

How do I know if I qualify for Chapter 7 under the new law? 

   Basically, the 2005 law requires application of a “means test” to all Chapter 7 petitions for bankruptcy.  In this case, “means” is your ability to make some kind of payment to your creditors. A common determining factor for whether or not you will qualify for Chapter 7 is whether your income falls above or below the state average income. The average income is determined by family size. A bankruptcy attorney can help you determine if you qualify.

How is a Chapter 13 different from a Chapter 7?

   Chapter 13 can be thought of as more of a reorganization of debt rather than a total discharge. Under Chapter 13, you propose a plan to pay your creditors over a 3 to 5 year period. Generally, you will be required to pay as much as you can afford each month. That is, you figure out your monthly income, you subtract your reasonable monthly expenses and the difference is what you have to pay to the trustee. One of the biggest advantages of filing under Chapter 13 is that you get to keep all of your property. However, you are obligated to make timely payments over the 3 or 5 year period.

Since there are so many options, what’s the best choice for me?