Frequently Asked Questions About Debt Settlement
01) What happens in a Debt Reduction or Debt Settlement Program?
Once in our program, you make monthly payments into our firm's trust account and when you have accumulated sufficient amounts to pay off a debt, we negotiate with your creditors to lower the amount you owe. Once the negotiations are complete, we finalize a settlement with the creditor and pay them the negotiated (lower) amount in full satisfaction of the debt. Once payment is made, you will owe nothing further on the settled account.
02) How long will it take to reduce my debts?
The time required to reduce all your debts depends upon your specific financial situation. Typically, clients are able to complete the Debt Reduction Program within three years.
03) Can you stop debt collectors from contacting me?
Debt collectors are regulated by the Fair Debt Collection Practices Act (FDCPA). We will immediately contact all of the creditors you place into our program to advise them that we are representing you and that all further communications must be with us. Most creditors acknowledge our request and instead will contact our office for information on your account. If you are still being harassed by any creditors after you have been in our program for at least 60 days, please let us know and we will contact the creditor/debt collector.
04) A Creditor advised me that they do not work with debt settlement agencies. Is that true?
While certain credit card issuers will not work with debt settlement and/or debt consolidation agencies, since we are a LAW FIRM, this does not apply to us. Please rest assured that we have successfully worked with all of the major credit card issuers.
05) Can I use Debt Reduction for all of my debts?
You can use our program to reduce unsecured debt (debt arising from credit cards, personal loans and certain medical bills). Debt Reduction cannot be used to reduce secured debt, such as home loans, auto loans, jewelry, furniture, student loans and utility bills. We also cannot service IRS obligations or government-backed student loans.
06) Should I just file bankruptcy?
In our opinion, bankruptcy should only be used as a last resort and only after debt reduction remedies have been fully explored. Please note that recent changes in Federal Bankruptcy laws have made it more difficult for many people to completely eliminate their debts in bankruptcy, and therefore, a debt reduction program is usually a better alternative. Also, a bankruptcy filing will remain on your credit reports for at least 7 years and possibly longer.
07) How does Debt Reduction compare to Debt Consolidation or Consumer Credit Counseling?
In our Debt Reduction Program, we negotiate with your creditors to reduce your debt for amounts significantly less than you owe, giving you the opportunity to pay your debts much more quickly. Debt Consolidation involves obtaining a NEW loan in an amount sufficient to pay-off ALL your existing debts. Therefore, persons in a Debt Consolidation program must qualify for the new loan which can be difficult for those with less than perfect credit. Also, in a Debt Consolidation program you are still responsible for the ENTIRE amount of your existing debts.
Consumer Credit Counseling agencies claim to be non-profit agencies who, for an 8-15% fee paid by the creditor, can sometimes lengthen the term of your debt and thereby reduce some of the interest that accrues; however, your outstanding principal is usually not reduced. Also, this method is generally a longer-term approach to debt resolution and may take 5 – 12 years compared to our Debt Reduction program.
08) What happens if I get sued?
Although most creditors would prefer to work with us to resolve your debt, in certain cases, especially those involving higher balances, creditors may instead choose to file suit. If that occurs, we can help you arrange to consult with an attorney or paralegal in your area so that you can decide how best to deal with the situation. Keep in mind that we can settle debts with creditors even where they have decided to file suit.
09) Will my credit rating be affected in a Debt Reduction Program?
Your credit rating will likely decline while we accumulate sufficient funds and negotiate with your creditors. However, after you begin paying off debts, the amount of debt you have will decrease and that will likely improve your credit rating. Also, enrolling in a Debt Reduction program is looked upon more favorably than filing bankruptcy. Finally, keep in mind that once you successfully complete the Debt Reduction program, you will have freed up additional cash to put into savings and pay for things that you and your family need and/or enjoy.
10) Who is a candidate for a Debt Reduction Program?
Our program is generally for people who are having difficulty paying their monthly debt obligations in a timely manner due to financial hardship (loss of employment or income, health issues, divorce, etc.) and cannot foresee being able to repay their debts in the future.