Debt settlement is the act of negotiating with your creditors to change the terms
of your debt obligations. Debt settlement is generally performed on unsecured debt,
and in most cases, is proven to be much more effective than merely reducing interest rates,
as is the norm with debt consolidation and Consumer Credit Counseling (CCCS). If you reduce
the actual debt balance, debt settlement provides a much faster means of becoming
debt-free. Through a debt settlement strategy, you set aside a sum of money for a lump
sum settlement or allocate a certain amount of money each month toward negotiating
settlements with your creditors or representatives of the debt. Generally, because you are
unable to make the required minimum payments expected of you, you are not making
payments on these accounts while this process is taking place (if you are able to make
payments without causing hardship to yourself and your family, you should consider another
alternative to debt settlement). When a settlement for a reduced payoff is reached, a
payment or series of payments are sent to the creditor or representative to satisfy the
debt.
How long does the debt settlement process
take?
The amount of time to settle debt will vary depending on the status of your debt, the
amount you are able to dedicate toward the debt, and your ability to negotiate the debt. If
you have money already available for negotiating the debt, settlements can reached in days
or weeks. If not, if can take months and in some cases years. Keep in mind that making only
minimum payments can result in unsecured debt sticking around for 20 or 30 years and credit
counseling will usually take 5 or 6 years. It is very common for debt to be eliminated in 2
to 4 years using the debt settlement strategy.
What happens to my credit report (FICO Score) if I
do debt settlement?
That really depends on the state of your credit report right now. If you are considering
debt settlement as a strategy, chances are you are already maxed out on your credit and/or
delinquent. If that is the case, I have bad news, your credit is already significantly
damaged. During the debt settlement process it is likely that your credit will continue to
deteriorate and in some cases deteriorate quickly. Keep in mind that your mission is to rid
yourself of paralyzing debt so the credit should be secondary. Also, once your debt has
been eliminated, you should see a drastic improvement in your credit standing so the faster
you settle the debt the faster you will be back on your feet.
Also be aware that other alternatives such as credit counseling will negatively affect
your credit. The only way to sustain a good credit rating is to pay your debt as agreed and
to maintain your accounts in what the creditors consider a responsible manner.
How do I know if debt settlement is right
for me?
The true test to determine whether or not you should consider debt settlement is based
on your ability to pay your debt as agreed. If you are unable to continue making your
minimum payments (plus a little extra) without jeopardizing some other important aspect of
your life (like keeping a roof over your head or putting food on your table) then you
should consider something else. Credit counseling or negotiating the monthly payments and
interest rates is appropriate when you are a little short each month. Bankruptcy may be
appropriate when you are so far in the "red" that you have virtually no money available to
pay toward the debt. And debt settlement is likely appropriate if you fall in between
these two groups. The bottom line is that as long as you have a legitimate financial
hardship and have the ability to address your debt in a reasonable fashion, debt settlement
is likely right for you and will work.
Can I really negotiate my debt on my
own?
Yes. For many people the task seems confusing but with a little guidance and expertise
at your side the job gets much easier. It really isn't rocket science. You just need to
know what to do and when to do it and we will fill in those blanks for you.
Will I still be able to use my credit
cards?
As soon as you either fall delinquent or indicate to your creditors a need to
negotiate, your accounts will be closed to future use.
Why shouldn't I just have someone do this for
me?
That is certainly an option but there are some things you should consider. First, most
debt settlement companies charge several thousands of dollars to settle your debts for you
(usually 15% of the total debt) and much of the fee is charged in advance of them settling
anything for you. Second, many of these companies are operating illegally in states they
shouldn't be operating in. Third, many creditors are starting to create policies of not
working with third-party debt negotiation firms. So in essence, you can probably achieve
better results yourself.
Do you offer a
guarantee?
We can't unfortunately guarantee any results. Every situation is different. What we can
guarantee is that you will receive the best guidance possible from a Debt Strategy Coach
and that with our help, your results will be the same or better than you would have
received by using a debt settlement company. And you won't have to pay a penny is debt
settlement fees in the process. If you feel that you are not being dealt with properly and
if it can't be resolved, we will gladly refund your fee, no questions asked.
Is this legal?
Absolutely. It is 100 percent legal for you to negotiate your debt with your
creditors.
What can the creditors and debt collectors do to
me?
First, chances are they will begin calling you if they haven't already done so. In some
cases, they will become quite aggressive in their tactics. We will show you how to minimize
or even eliminate the calls and even gain the upper hand over your collectors.
Creditor calls are simply part of the process but we have weapons that we can share with
you that should make them vanish. Second, they have a legal right to sue you for their
money though this happens far less than you may think. We estimate that less than 10
percent of accounts go legal. Even then, there are defenses you can follow when an account
goes legal . The bottom line is that it is far too costly and impractical for creditors to
sue in every situation.
Are there tax consequences to settling a debt for
less than the original balance?
Yes. If you have a debt that is settled for less than the original balance, and the
difference (the forgiven portion of the debt) is greater than $600.00, the creditor is
supposed to send you a 1099c, which would then be reported as income.
The IRS does allow you to write off any income from forgiven debts up to the amount by
which you were insolvent at that time. Unless you had a positive net worth at the time that
you settled an account, which, for the most part, is unlikely if you're buried in debt,
then you generally wouldn't have to pay any taxes on the forgiven debt(s). Always consult a
tax attorney or advisor for options that can be applied to your specific circumstances.
Incidentally, if you do wind up owing taxes, it is because you saved money. So, keep that
in perspective.
Are there debts that can't be settled?
Secured debt cannot be settled using the strategies we show you in this program. A
secured debt is a loan or obligation that is tied to a physical property. A home and car
are examples of property that is often purchased with credit. That being said, it is
possible to settle outstanding debt on property you are forfeiting. So for example, if you
had a car repossessed and there is still money owed after the car is auctioned, that
balance can be settled as unsecured debt. Also, student loans, child support, and most
debt owed to the government are not negotiable (there are exceptions but these type of
negotiations are beyond the scope of Debt Response and probably require professional
assistance).
Can my wages be garnished?
In most states, wage garnishment is possible though it is extremely rare. Debt
collectors can try and trick you into thinking that income execution is right around the
corner and they use it to intimidate you into paying them. For a wage garnishment to take
place, a creditor must first sue you and get a legal judgment. They then must take
additional steps to obtain authorization for garnishment. It is a lengthy process and you
will have plenty of time to react in the event this should happen. Worst case scenario, you
may need to negotiate a settlement that is higher than you would have liked.
Can I still settle my debt if I'm currently being sued by
a debt collector or creditor?
Yes. It is still possible to come to acceptable settlement terms during litigation or
after a judgment has been filed.
Why should I enroll in the Debt Settlement Survival
System instead of another self-help product?
We believe that the Debt Settlement Survival System is the most comprehensive
debt negotiation coaching program on the market. Other programs are focused around a book
and perhaps some audio cd's, but you are mainly on your own. We stick to the things you
need to know and do to get the job done. Do you need to know how to build a car in order to
drive one? We don't think so and we feel the same way about debt settlement. With the Debt
Settlement Survival System, you have us at your side every step of the way. And at a cost
of only $197 plus $25 per month with no contract and no long-term obligation, it is the
most cost affective way of settling your debt.
