How to Get Out of Debt With Debt Settlement
Thank You for choosing to free yourself from your FINANCIAL SLAVERY!
“HOW TO TAKE THE LEGS OUT FROM UNDER THE CREDIT CARD COMPANIES, AND SAVE YOUR FINANCIAL LIFE WITH THIS INFORMATIONAL STRATEGY”
Reading this will have an immediate impact on you so please set aside time enough to read this thoroughly and make a conscious decision to better your situation.
With the information we are freely giving you can commit to proactively break the BONDS of FINANCIAL SLAVERY that has held you for a very long time.
The truth is…your financial house is easy to run. All you need to do is to understand how the Credit Card works and use them to earn FINANCIAL FREEDOM.
It is not important how you got here.
It is not important if you owe 10k or 1million in credit card debt.
If you can’t sleep at night, and wonder if you will ever be financially sound again, then you need this information.
If the stress of your debt is ruining your family, and your relationships, then you need this information.
If you thought you’d be better off financially, by now, then you need this information.
If you’re facing retirement, and can’t possible see how you will be able to maintain your current quality of life on social security, then you need this information.
DEBT SETTLEMENT IN A NUTSHELL!
If you decide to stop paying your creditors the way they want to be paid for the next 10-20-30 years the original creditor will then sell your debt to a collection agency normally within 30-90 days from the first missed payment. During this time the original creditor will call you for payment and try and keep you as a client. If they get nothing from you they will sell your debt.
The creditor sells your debt to a collection agency for 2 reasons:
1. They get .20 cents on the dollar from the collection agency.
2. They get an additional .50 cents on the dollar from the government in the form of a tax break.
Therefore, the creditor gets .70 cents on the dollar, by selling your debt without you paying them a dime.
Let’s say you owe Capital One $1,000. If you do not pay them then they will sell you to collections for 20% of what you owe ($200). Then they turn around and get the tax break from the government for 50% of what you owe ($500). So they have made $700 on your $1,000 debt without you paying them a dime.
Once your debt has been sold to a collection agency for .20 cents on the dollar, send a Cease and Desist letter. By law they will no longer be allowed to contact you. They do not have the same rights as the creditor because they are a 3rd party who purchased the debt.
Then tell the collection agency how you intend to pay them .40 cents on the dollar, giving them a 100% profit, in exchange, they will report to the credit bureaus that your debt was paid or settled.
Debt Settlement works by reducing the balance owed (principal) on your unsecured personal debt accounts through the time-honored process of creditor negotiation. This is different from simply reducing the interest rate as with Debt Consolidation and Credit Counseling, which do not affect the total debt balance. By reducing the balance itself, Debt Settlement provides a much faster means of becoming debt-free. Most creditors are willing to accept 50%, 40%, sometimes as low as 20% of the balance owed in order to close out an account rather than lose the entire amount in a bankruptcy proceeding.
As a consequence of this approach, money that was previously wasted on endless minimum payments (most of which went toward interest charges) goes toward reducing the actual debt balance. That’s why Debt Settlement through negotiation is the fastest debt elimination method short of Chapter 7 bankruptcy.
If you cannot bear the thought of losing your financial dignity and loss of control by going through bankruptcy, then this approach is for you.
While the debt settlement approach is not suitable for everyone, its flexible nature makes it applicable to a wide range of financial circumstances. For individuals and families seeking an alternative to bankruptcy, there is simply no better option to get out of debt. Here are a few guidelines to help you determine whether or not debt settlement is something you should consider
1. Do you have a legitimate financial hardship condition?
If you are over your head due to a hardship circumstance, and you’d prefer to work things out with your creditors rather than declare bankruptcy, then debt settlement can provide an honest and ethical debt relief alternative.
2. Are you committed to avoiding bankruptcy?
Debt Settlement is best viewed as a bankruptcy alternative, one that allows you to keep control over the process and maintain privacy while working through your financial difficulties. As with most things in life, success is determined by your level of commitment to staying the course, even when the road gets a little bumpy. If you are likely to give up at the first rough spot, then debt settlement is probably not the best choice for you. But if you are determined to avoid bankruptcy, debt settlement will likely be the most attractive debt solution for you.
3. Do you owe more than $10,000 in unsecured debt?
Debt Settlement is strong medicine, and it should be reserved for serious debt problems. While everyone’s budget is different, most people can work their way out of smaller debt obligations.
In fact, it doesn’t matter what mistakes you have made on your own, as it is NOT important at all. What matters now is HOW TO GET OUT FROM UNDER IT!
SERIOUS QUESTIONS AND ANSWERS
Q: What happens to my credit score?
A. The effect of the debt settlement process on your credit score will partly depend on your current credit status before starting. Few people with debt troubles have perfect credit to begin with. In general, your credit score (usually called the FICO score) will decline during the process, and will begin to improve again after you have become debt-free. There are several key points to bear in mind here. We recommend against applying for new credit while going through thedebt settlement process. It simply doesn’t make sense to take on new debt while you’re trying to tackle your existing debt problem.
So the short-term decline in credit score is rarely a problem for clients. In addition, the credit score itself does not take into account your debt-to-income ratio, which is used by lenders (especially in the mortgage industry) to determine whether you qualify for a home or auto loan. In other words, you can have a high credit score due to a clean payment history (even though it’s killing you financially to keep up those payments) and still be denied a new loan because you already carry too much debt.
By completing the debt settlement process, your debt-to-income ratio will improve dramatically! Any way you look at it, the effects of Debt Settlement on your credit will certainly be less damaging than the 10-year derogatory mark made by bankruptcy. Staying current on mortgage and car payments will help your score.
Q: What are the tax consequences?
A. Financial institutions are required to report canceled debts over $600 (the portion forgiven during the settlement transactions) to the IRS, and the debtor is required to report that as income on their tax return. However, the IRS permits you to offset any “income” from canceled debts up to the amount you were “insolvent” at the time the debts were canceled. You are “insolvent” if you owe more than you own, or in other words, if you have a negative net worth.
If you’re deep in debt, it’s not likely that you have a positive net worth, so it’s rare that a client would have to pay taxes on the forgiven debt balance. The exception might be an individual with a high level of home equity, which might make the overall net worth positive and thereby eliminate the insolvency exclusion. However, this is the exception rather than the rule.
It is a likely circumstance that you might owe tax on the forgiven debt balance, you’ll still be way ahead of the game by eliminating your debt balances sooner rather than later.
Q: What about lawsuits?
A. While creditors have the legal right to bring a lawsuit for non-payment of a debt obligation; such lawsuits are far less common than most people think. It costs money to sue someone, and a legal judgment is simply a piece of paper unless there is a way to collect money against it. The threat of litigation, on the other hand, is all too common, even though debt collectors are not supposed to threaten legal action unless they are specifically authorized to bring suit. In general, lawsuits can normally be avoided, provided you are willing to work out suitable arrangements with your creditors through the negotiation process.
Contrary to popular belief, most creditors would rather work things out amicably in a negotiated settlement than spend more money taking a customer to court (with no guarantee of being able to collect on a judgment). That’s why thousands of litigation-free settlements are transacted every month all across the country. Creditors won’t admit it publicly, but Debt Settlement methods works much better for them than forcing people into bankruptcy through overly-aggressive collection techniques.
This information is for your use, however is not legally binding, and it is suggested that an attorney review any settlement you enter into. The worst-case scenario is that a you might be required to pay a debt balance in full in the event of legal action by a creditor. This is little different from the starting situation most clients find themselves in, and again, it is a fairly rare occurrence.
Q: Can my wages be garnished?
A. If you listen to some debt collectors, you might be fooled into thinking that they will seize your very next paycheck unless you make a payment right then and there. The threat of losing part of one’s wages to a garnishment action is truly frightening to someone already struggling financially. But this is mainly an intimidation tactic used by collectors to scare people into committing to a payment schedule whether or not they have the funds available.
Actual garnishment actions are relatively rare, and do not happen without advance warning. First, a creditor must bring a lawsuit, obtain a judgment, and then take an additional step to obtain authorization for the garnishment. Plus only one creditor can garnish your wages at a time. No one can take your paycheck without court approval, and you must be given notice of such court action through formal documentation. So don’t be fooled by one of the oldest collection tricks in the book.
Q: What are the differences between Debt Settlement and Credit Counseling?
A. The most important difference between these two aproaches is that with credit counseling, you pay back all of the debt balances, plus interest and fees, whereas with Debt Settlement, you pay back only a portion of your debt load. That’s why Debt Settlement is a much faster path to debt freedom (2-3 years) than Credit Counseling (5-9 years). This means a lot less money out of your pocket is used through the debt settlement approach.
Another key difference is that your Debt Settlement firm works solely for you, the consumer, and receives no compensation directly from the creditors. In other words, your debt settlement firm is truly on your side. With a credit counseling agency, there is a dual relationship, where part of their income comes from the client and the majority of it comes from kickbacks paid by the creditors.
This creates a built-in conflict of interest and creates doubt as to whose side the agency is really on. Also, debt settlement provides much more flexibility than credit counseling in both the monthly budget level and the types of accounts that may be enrolled.
For example, if you have a really tough month and need to skip a payment, that situation can be absorbed by a debt settlement process, whereas it will cause serious problems with a credit counseling process. Further, if your accounts have “charged off” and gone into the third-party collections cycle, you can still enroll those obligations in a Debt Settlement approach where they will be rejected by a credit counseling agency. Additionally, you can begin to work on the restoration of your credit score, that much faster, having completed Debt Settlement.
Q: What kind of debt can be negotiated?
A. As a general rule, any type of unsecured debt can be successfully negotiated. An unsecured debt is one that is not tied to a specific material item that could be repossessed by the creditor. So an auto loan, for example, could not be included because the creditor could legally repossess the vehicle. Credit card debt, medical bills in collections, department store cards, signature loans, unsecured lines of credit, and revolving charge accounts are all types of accounts that can be included in our program.
The main exception here are student loans, which in most cases are government backed loans that cannot even be discharged in a bankruptcy proceeding. (Private student loans that are not sponsored by the government can be included.)
Q: What if a creditor won’t negotiate?
A. Debt Settlement entities have established contacts with the major banks, collection agencies, and collection attorneys. Debt settlement is recognized as a viable solution by collection industry professionals.
In the rare instance where a creditor balks at accepting a reasonable settlement at the time it is proposed, it is often a matter of simply waiting for a different phase of the collection process. Some creditors are more inclined to play “hardball” than others, but virtually all of the major institutions eventually sell their accounts to collection agencies in order to get what they can for the account. Since the collections agencies acquire these accounts for pennies on the dollar, they are more inclined to accept a reasonable settlement offer, which still represents a profit on their purchase.
Q: Are there debts that can’t be negotiated?
A. Secured debts cannot be settled. This includes home loans, second or third mortgages, equity lines of credit, auto loans, and financing contracts tied to a specific piece of property that may be legally repossessed by the creditor. Federal student loans, although unsecured, must also be excluded from settlement. In addition, Federal and State taxes cannot be included.
Q: Can I do this myself?
A. Yes, it is certainly possible for a consumer to negotiate his or her own debts. However, there are several important factors that should be taken into consideration before making such a decision. First, do you have the time? For individuals with serious debt problems, the complexities of the negotiation process can be very time consuming. Many people simply do not have the time to add this labor-intensive task on top of an already busy work schedule. Second, it requires a certain kind of psychological toughness to haggle with creditors.
The average consumer is hampered by the embarrassment and shame they feel over having gotten into trouble. With all the tricks, traps, and pressure tactics used by creditors, most people will find themselves better off with professional assistance. Third, as with any profession, there are techniques not easily mastered by an amateur. Without professional coaching, the likely result will be high-percentage settlements in the best case and outright failure in the worst case.
When you consider that the total payout including professional fees will still be far less than your original balances, it makes more sense for the average person to obtain debt help from Debt Settlement entities.
Q: Don’t I have to pay taxes on the money I save?
A. Yes you may have to pay income taxes on the amount you save, but this amount is usually still much less than the amount you would have paid in interest. Check with an accountant for details.
Q: What if I leave accounts out Debt Settlement
A. We do not recommend leaving any accounts not settled, for two reasons:
1. There is a good chance the credit company will see delinquencies on this or on your other accounts and close your account anyway.
2. It makes it extremely difficult for us to negotiate with some creditors if they see you defaulting on their account and not others and hurts the settlement process.
Having an ATM/debit card that is also a VISA or MASTER CARD tied to your checking or savings account is a good alternative that will leave you with a credit card you can continue to use without affecting this process.
Q: What credentials or affiliations should a consumer look for regarding a Debt Settlement company?
A.Debt Settlement companies should be members of a professional organization that specializes in this type of debt settlement negotiation. Including The Association of Settlement Companies and our Professional Debt Arbitrators and Trained and Certified by The International Association of Professional Debt Arbitrators.
CODE OF ETHICS
These practices should be followed and aim to improve the industry with Best Business Practices for Debt Settlement.
1. Debt Settlement Specialists DO NOT TELL PEOPLE TO STOP PAYING THEIR CREDITORS! They should say that our clients make an independent decision to stop making monthly payments. This is a small technicality. and the sooner their account goes into collections the sooner it can be settled.
2. Debt Settlement Specialists CAN’T STOP THEIR ORIGINAL CREDITOR FROM CALLING! Collection Agencies should be stopped with the Debt Settlement process. Until the debt is sold to a collection agency, the original creditor has every right to call.
3. ONCE WE SETTLE EACH DEBT WITH THE COLLECTION AGENCY, IT WILL SHOW ON THEIR CREDIT REPORT “PAID” OR “SETTLED”. It will NOT show paid in full. Also, once paid, their credit report will show there were collection agencies involved and that their creditor charged them off.
4. WE CAN NOT STOP THEIR CREDITORS FROM ADDING MORE INTEREST, PENALTIES OR FEES AFTER THEY ENTER INTO DEBT SETTLEMENT. Settled amounts are those that were owed at the time they started.
5. IF THEY ARE CURRENT WHEN SETTLING DEBT, IT WILL INITIALLY NEGATIVELY AFFECT THEIR CREDIT SCORE! If you already have accounts in collections, it may have little or no effect as it has already been tarnished. If they continue to make mortgage or car payments that will help, however, the bottom line is that this will only be temporary.
6. IF THEY ARE PLANNING TO BUY A HOME, GET A CAR LOAN OR ANYTHING THAT NEEDS DECENT CREDIT. If you are current on their bills, you should wait until after they have completed those types of transactions to realize the full depth of the financial picture and then enter into a debt settlement process after. Advocating that would run counterintuitive to the essence of debt settlement. Many are being declined for mortgages or cars, etc because of old bad debt in collections that haven’t been paid in years, if ever. An accelerated option should get everything cleaned up and settled saving them thousands of dollars in pay offs. Additionally settlements can be paid sooner that the date negotiated based on your payment plan, without penalty.
7. YES, YOU CAN BE SUED BY STOPPING PAYMENT ON DEBT! Absolutely one can be sued! Clients should be instructed to answer the law suit and by going to court, the court will acknowledge they owe the money. It is an unsecured debt, so basically the creditor is right back where they started. Negotiated settlements on these accounts that can lift garnishments or liens when paid.
8. CAN THEY GARNISH THEIR WAGES? Absolutely! You can have your wages garnished in some states (for example, they cannot garnish wages in TX) and there’s nothing we can do about that. Settlements may be made with that company through to get the garnishment lifted. The creditor would much rather get a lump sum settlement than get a little bit of money each month. Keep in mind that only one creditor can garnish wages at a time.
9. CAN THEY PUT A LIEN ON THEIR HOUSE? Absolutely! If a creditor places a lien placed on someone’s house, they cannot collect any money unless the house is sold. Settlement with a lien holder may lift the lien altogether.
10. THIS IS A BANKRUPTCY ALTERNATIVE! Remember folks, this information is to help people who basically are drowning in debt and have little alternatives as far as solutions go.
11. PREDICTING CREDIT SCORES IS IMPOSSIBLE! Debt Settlement Specialists don’t know what someone’s credit score will be when they finish their negotiated debt payments. It is clear that it will drop once you begin it, and should improve once finished.
12. ARE THERE ANY TAX LIABILITES ON THE DOLLARS THAT ARE SETTLED? Yes, there can be. If someone has a negative net worth, which is most of our clients, then they most likely will not be responsible for taxes on the money we saved them. We are not accountants, and don’t dispense advice as if we were. Simply consult an accountant if this question arises. Bottom line, if you are responsible for any taxes, you are better off having to pay taxes on a percentage of what you didn’t have to pay on their original debt, than have to pay 100% of what you originally owed.
“WORRYING ABOUT YOUR CREDIT SCORE WHEN YOU ARE DROWNING IN DEBT- IS LIKE WORRYING ABOUT WHAT YOUR FRONT LAWN LOOKS LIKE WHEN YOUR HOUSE IS ON FIRE!”