If you are struggling to pay off your credit card debt, medical bills, or other unsecured debt, you may be wondering if the advertisements you see on the TV, radio or the Web are for real. The main questions consumers ask are “Can I really get out of debt for a fraction of the cost and pennies on the dollar? Will debt settlement help me get out of debt quickly, legally and safely? What are the effects on my credit rating and future ability to get a loan?
Below you will see a variety of questions and answers that we wanted to share with you. These are among the most commonly asked. By reading on, it is our hope that you’ll be able to make an intelligent decision as to whether debt settlement is the right choice for you.
Debt Resolution (also referred to as debt negotiation, negotiated debt settlement or sometimes incorrectly called debt consolidation) means that your debt is negotiated down to a reduced amount and paid off in a lump sum. In some rare cases, multiple payments are utilized to pay off the debt, settling the account in full. In most cases, when you hear that debt can be paid off for pennies on the dollar, you are being misled. While in very rare cases, some debts can be settled for this very low figure, typically debts are settled within the range of about 15 – 75 cents on the dollar.
Settlement is one of the most effective choices available to consumers. It’s a great choice if you have more debt than you can pay off in a 2 – 3 year time frame or are experiencing a financial hardship that has you falling behind (or just about to be) on your monthly payments. Why would creditors choose to settle debts rather than simply charge you interest and late fees over and over again? Well, it’s really a matter of dollars and good sense. Creditors know that if you get into such a bad financial position that you can’t pay your monthly payments, you may decide to declare bankruptcy or simply do nothing. In this case they may get nothing! Therefore, they are usually very willing to settle for a lower amount, given your hardship, than risk getting nothing at all, especially with a bankruptcy among the alternatives.
Bankruptcy may allow you to eliminate most of your debts quickly and this is typically referred to as a “Chapter 7 Bankruptcy.” In other cases, you may be required to pay back a percentage of your debts over time. This is typically referred to as a “Chapter 13 Bankruptcy.” Bankruptcy also offers legal protection under the court so that you don’t have to worry about being sued or harassed by creditors while completing the bankruptcy process. While most reputable debt settlement firms will work to assist in minimizing creditor calls and harassment where possible, debt settlement does not provide the guaranteed legal protection that bankruptcy does.
Chapter 7 bankruptcy is not an option for everyone and it has gone through some changes since the bankruptcy reforms of 2005. Unlike the not so distant past, it has become more difficult to qualify for full liquidation (forgiveness) of your unsecured debts. Chapter 13 bankruptcy requires five years of court-ordered payments to a trustee, and may require you to surrender some of your assets.
However, as getting all of your options will help you make a more informed decision, speaking to a bankruptcy attorney may be a worthwhile discussion. Most reputable debt settlement firms can refer you to a trusted bankruptcy attorney if you have detailed questions or if they determine that you might be better served by speaking to them instead. Typically, if you are in such a financial state of hardship that you can’t even make your minimum monthly payment into our program, speaking to a bankruptcy attorney is highly recommended.
There are a few factors that a well-trained debt specialist can go over with you in more detail. In general, if you can afford to pay back your debts on your own by paying more than the minimum payment every month without hardship, it’s probably the best route. It will not impact your credit score (and may improve it), and it will likely be relatively pain free. For those in true (or soon to be) financial hardship, debt settlement from a trusted and time-tested organization is a better option. If your total unsecured debt balances are less than $10,000, Consumer Credit Counseling is an excellent choice as your payments can be consolidated into just one, and typically, interest rates are reduced on your accounts. However, be warned. Many counseling programs have a very high drop out rate, can last up to 5-7 years, and you end up paying back 100% of the debt you owe, plus any new interest.
With the huge rise in unemployment, unmanageable debt, economic problems, and uncertainty in the marketplace, many fly-by-night companies have sprouted up offering debt settlement to consumers that are not legitimate; in fact many are nothing more than scams. Some offer unrealistic settlement expectations or promise nearly impossible monthly payments and time horizons. They are simply doing this to make a quick buck at your expense!
A good debt resolution firm always trains its agents to help you understand what your options are and is very realistic with you about what to expect. Often, companies simply looking to scam you look to collect fees up front regardless of whether they stand behind their promises.
If you are current on your payments, it is very difficult, if not impossible to settle your debt. Creditors typically want to see that you are in a hardship situation before they are willing to negotiate. Therefore, you will have to voluntarily stop paying your unsecured debts; allowing them go into delinquency before settlement. In addition, you cannot pick and choose which debts you wish to settle in most cases. Your creditors and/or collections agencies may review your credit report, and most will be unwilling to negotiate when they see that they are being offered less than what is owed to them while others are being paid on time as agreed. Secured debts, such as a home loan or car loan are collateralized; you should continue to pay these accounts on-time to avoid repossession or foreclosure proceedings.
By not paying your creditors, your credit will be adversely affected by debt settlement. However, having to experience this circumstance may be better than having to file for bankruptcy, especially on your credit rating. During your debt settlement program, your total balances are being lowered over time as they are settled in full – a great start to recovery!
If you have just a couple debts or less than $10,000 in debt, you could to try to talk to your creditors directly to settle the accounts yourself. There is a lot of information publicly available to assist with this, but word to the wise: If you owe over $10,000 in debt, have several accounts you need to settle, or need the structure and the guidance of a knowledgeable professional, you should seek out the assistance of a knowledgeable debt settlement firm.
Debt settlement is by no means an exact science. And it’s difficult for an individual lacking experience with creditors to determine whether a settlement is fair or not. In addition, you have to directly handle all creditor calls and the harassment that comes with the job. Many people are simply unable or uninterested in handling that kind of pressure, especially with the daily complexities of managing a job, household or family at the same time.
Hiring a professional debt settlement firm with a good reputation can no doubt save you more money, give you better advice, and get you out of debt in a much less stressful manner, enabling you can move on with your life. Always make sure that you heavily screen who you are working with, and especially make sure that they are a member of one of the major industry associations. AFCC (The American Fair Credit Council) is, by far, one of the most successful of these. Many if not most legitimate firms will be a member.
In general, in the United States, the IRS considers debt which is forgiven as income. This means if you borrow $15,000 on your credit cards and settle it for $8,000, the $7,000 difference is taxable as income since it is not repaid. However, the IRS will often waive
Prime Financial Solutions has been audited to verify that we are fully compliant with all practice standards. If you are thinking about working with a debt settlement company to settle your debts, there are some essential questions we feel you should ask before you sign up::
Many firms out there may have flashy websites or sound professional on the phone, but you’d be surprised at their actual experience level. Many if not most, don’t even have their own marketing initiatives in place and simply buy leads from lead generation companies. In addition, certain agents you speak with may not have experience with debt settlement either and are simply professional salespeople, looking for a fast commission. If the debt settlement firm cannot provide proof of its experience, settlement history, and accreditation, you should not be working with them.
There is legislation in a minority of states which places restrictions and requirements on any form of debt management. While the federal government in many ways regulates debt settlement in addition to state governments, it’s important that you as the consumer follow up with any firm you work with to find out if they are able to legally provide services in your state.
Some of Prime Financial Solutions programs are performance based, which means that our clients do not pay any fees until settlements have been negotiated on their accounts. However, if you are enrolled in one of Prime Financial Solutions attorney-based debt resolution programs, then Veritas Legal Plan may receive fees prior to any settlement being obtained with a creditor. The total fees for our programs range from 15% to 24% of the enrolled debt balances that are settled. Upon each account being settled, a fee will be assessed specific to that settlement and collected from the special purpose account set up specifically to facilitate the debt settlement process.
Debt resolution firms do not make your monthly payments to creditors for you. Rather, any payments made to creditors are a result of negotiated lump sum settlements or in rare cases, based on a pre-negotiated settlement payment plan.
Your funds should be held at a third party account, referred to by many as a “special purpose account” which is FDIC insured. This account should always be in your name with you having ultimate control over its funds regardless of the terms of your settlement program. If the debt settlement firm tells you to save money on your own, the likelihood of graduating from your program historically has proven very minimal. Any reputable debt settlement firm endorses the special purpose account as the most effective method of client savings.
If you make your monthly payments on time and follow your program protocol correctly, you should experience your first settlement within 4-6 months. However, settlement isn’t an exact science. If you only carry a couple very large balances, then it may take longer depending on your creditors and your monthly payment. However, you should discuss your specific situation with a certified debt specialist.
Yes, however in some cases it is impossible to stop all creditor calls.
Yes, this is a possibility based on the motives of each individual creditor but it is based on several factors and isn’t as cut-and-dry as one would assume. However with Prime Financial Solutions' Debt Resolution Program legal representation will be provided for all clients. Any reputable debt settlement firm will never put you into a program that lasts over 60 months. This greatly minimizes the risk as much as possible.
In some cases there will be an adverse effect on your credit report while your new terms are being restructured.
AFCC (The American Fair Credit Council) wants you to understand both the potential benefits and pitfalls that may arise out of the debt settlement process and to have reasonable expectations regarding the outcome of your program. Below are the questions which AFCC has laid out on its own in its efforts to successfully guide consumers to the most favorable outcome when enrolling in a debt settlement program. We wanted to also include them for you.
When you enroll into a debt settlement program, the goal you have set is to negotiate mutually agreeable settlements between you and your creditor(s) for payment of certain unsecured debt(s) described as Enrolled Debts. No specific results can be predicted or guaranteed.
After saving sufficient funds, you will be responsible for controlling the fund settlements that your debt settlement company will endeavor to negotiate on your behalf. 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.
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 and come up with some debt remedy solutions. Actual settlement amounts, necessary savings and the period required to reach your goal may vary based on creditors actions and other factors.
Most creditors and collectors negotiate with debt settlement service providers. Debt settlement companies cannot force the negotiations and cannot force creditors to accept a settlement. Debt settlement companies do not make regular monthly payments to your creditors. Your creditors may 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.
Debt settlement programs assume an effort that will continue for many months. The time needed to produce a settlement depends on a number of factors. These may include: (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. Increased savings will provide you with the option to accept lesser discounts and will also enable you to accumulate funds to reach your debt settlement goals more quickly. However, any settlement must be acceptable to both you and your settling creditor.
The fees paid to debt settlement companies are intended to compensate the company for its efforts and will only be refundable to the extent they have not been deemed to have been earned in the manner described in the Client Agreement. Debt settlement program fees are not being set aside or held in escrow to fund debt settlements.
Communications with the creditors are handled on a case by case basis. In some instances creditors may not be contacted until several months after you enroll.
Debt settlement companies provide consumers with a method of debt resolution known as debt settlement. Debt settlement is an aggressive method of debt management that depends on the negotiation of mutually agreeable settlements between the consumers and the creditors.
When your creditor settles your debt, a savings of $600 or more off what you owed 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 any such Discharge of Indebtedness Income from your reportable income due to insolvency. For more information on tax ramifications to you personally you may also wish to consult a CPA or Tax Attorney and to refer to the IRS website www.irs.gov IRS Publication 908- “Bankruptcy Tax Guide” and IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness available on the IRS website.
No, debt settlement companies are not law firms and cannot provide legal advice, but some companies do work with legal networks.
Once you enroll in the program, our first priority is to minimize creditor harassment. With our lasting relationships with our service providers and their direct access to creditors, the debt resolution programs are able to reduce your total unsecured debt amount while providing just one low monthly program payment. This monthly payment amount is frequently as low as half as much as your current combined monthly payments to the same creditors. Our underwriting process is highly effective with the main goal to help you experience a lasting benefit to your financial well being.
Our knowledgeable, friendly, and experienced Debt Consultants at Prime Financial Solutions will discuss with you the benefits and qualification process of our Debt Resolution Programs, and then will propose an affordable monthly program payment that will fit within your budget. We feel our program is simply the best way to become debt-free without declaring bankruptcy and without consumer credit counseling.
*Fees are based on the amount of enrolled debt and may vary from state to state. Individual results may vary based on your ability to save sufficient funds to complete a debt settlement program, the creditors in your individual portfolio, and amount of debt enrolled. Monthly payments under the program may be less than your monthly minimums before enrollment. Estimates and statements made regarding program performance are based on historical results and the testimonials provided were dependent on the facts of the specific client’s situation. We cannot guarantee settlement results or that your debt balances will be lowered by a specific amount or percentage or that your debts will be resolved within a specific period of time. Any use of the term “debt-free” only applies to accounts that have successfully enrolled and completed a debt settlement program. Prime Financial Solutions, LLC is an enrollment agent for debt settlement programs and back-end services are provided by third-party companies. Prime Financial Solutions, LLC and/or the back-end service provider will not receive any fees until the terms of your debt have been altered with one or more of your creditors. While programs are designed to reduce your debt balances, creditors are under no contractual obligation to negotiate or accept settlement offers from our service providers. We do not assume consumer debts, make monthly payments to creditors, or provide tax, bankruptcy, accounting or legal advice or credit repair services. Please contact a tax professional to discuss potential tax consequences of settled debts. The use of debt settlement services will likely adversely affect your creditworthiness, may result in you being subject to collections or being sued by creditors or collectors and may increase the outstanding balances of your enrolled accounts due to the accrual of fees and interest. However, negotiated settlements obtained on your behalf resolve the entire account, including all accrued fees and interest. Photographs of persons used in this website are not actual clients. Prime Financial Solutions, LLC is not affiliated with CNN, MSNBC, Fox, CBS, or any other entity displayed on this website and all logos used are the trademarks and/or copyrights of their respective owners. Programs are not available in all states. Read and understand all program materials prior to your enrollment.
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