Personal and Business Debt
- What makes Debt Relief Services different?
- What are the differences between Debt Settlement and Credit Counseling?
- How does Debt Settlement work?
- Will Debt Settlement work for me?
- What are the tax consequences?
- What about lawsuits?
- Can my wages be garnished?
- What kind of debt can be negotiated?
- What if a creditor won’t negotiate?
- Are there debts that can’t be entered into the program?
- Can I do this myself?
Bankruptcy
Consumer Protection: Fair Debt Collection
- What debts are covered?
- Who is a debt collector?
- How may a debt collector contact you?
- What types of debt collection practices are prohibited?
Credit
- What is a credit score?
- Will ordering a credit report hurt my credit?
- How often do credit scores change?
- Does having too many credit cards affect a credit score?
Personal and Business Debt
Q: What makes Debt Relief Services different?
Our goal is to revolutionize the Debt Relief Industry -one client at a time! We believe in putting your needs first and focusing on financial solutions that are in your best interest. Our mission is to go beyond enrolling you in a debt relief program and actually help you stay debt free as well as protect you from future financial problems. We want to empower you to become FINANCIALLY FREE!
Debt Relief, LLC Services prides itself on customer service, the quality of that service, and full disclosure. Full disclosure means there we present this program in its entirety and lay out not just the positives, but the negatives as well. We don’t sugar-coat the process like all other companies do in this industry. Debt Relief, LLC sets itself apart also by:
1. We care about the health of your credit
Most if not all companies in the settlement industry have no regard for your credit score and its effects. To the best our knowledge Debt Relief, LLC is the only company that implements a credit repair program as you go through our debt settlement program.
2. Customer Service
The main goal of companies in this industry is to sign up as many clients in a month as possible. There are horror stories of clients not being contacted after enrollment 3-5 months into the process. Customer Service is priority number one for Debt Relief. We contact our clients twice a month. Clients have the ability to check on their accounts online via a user name and password anytime. And more importantly there is always a live person to talk to if you ever have a question or concern.
3. Full Disclosure
Our goal is to inform you of all your options to get out of debt. We do not sugar-coat any of the processes. We present the negatives and the positives in its entirety so that when you are ready to make the next step, you are informed and can make the right decision.
Q: What are the differences between Debt Settlement and Credit Counseling?
The most important difference between these two programs 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 (1-2 years) than Credit Counseling (4-7 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 program, whereas it will cause serious problems with a credit counseling program. 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 program where they will be rejected by a credit counseling agency. Most importantly, while Consumer Credit Counseling is a matter of public record (your credit history will show CCC on each account you enroll into the program), debt settlement is strictly confidential; unless you tell someone, no one will know.
Q: How does Debt Settlement work?
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 or to a collection agency for pennies on the dollar. From a business perspective, it is a matter of the creditor receiving something rather than nothing, as would be the case in most bankruptcies. Of course, different creditors have different policies, but as a rule, discounts of 50% or greater are routine in the industry. 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.
Q: Will Debt Settlement work for me?
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?
Most debt problems are caused by loss of income, medical issues, or divorce/separation. These are legitimate financial hardships that can happen to anyone through no fault of their own, and any one of these situations can wreak havoc on a household budget. The important point here is that the debt settlement system is for those who don’t feel like paying their bills. 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 your 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?
We are the first to admit that 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. If you only owe $5,000, for example, unless you are really in dire straits you can probably deal with that obligation the old-fashioned way – by paying off the debt in full, over time. In other words, smaller debt loads are more of a budgeting problem than a serious financial hardship. At Debt Relief we use the benchmark of $10,000 for evaluating whether or not a prospective client qualifies for our program. (Note: Exceptions are sometimes made based on hardship circumstances, so the $10,000 figure should be used as a rule of thumb or guideline.)
Q: What are the tax consequences?
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 (Form 982). 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. Our view is that even in the unlikely 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?
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 our method works much better for them than forcing people into bankruptcy through overly-aggressive collection techniques. Though we work with a nationally recognized law firm, we are not a law firm and does not provide legal advice. We do want our clients to understand that the worst-case scenario is that a client 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?
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 kind of debt can be negotiated?
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?
In the course of business, we have established contacts with the major banks, collection agencies and collection attorneys. Debt settlement is recognized as a viable solution by collection industry professionals, and at Debt Relief we pride ourselves on the professional reputation we have established by dealing fairly with creditors. 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 entered into the program?
Secured debts cannot be entered into our debt settlement program. 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 the program. In addition, Federal and State taxes cannot be included.
Q: Can I do this myself?
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 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 overwhelmed by the stress and unable to remain objective. Third, as with any profession, there are techniques not easily mastered by an amateur. Without professional experience, the likely result will be high-percentage settlements in the best case and outright failure in the worst case. Additionally, we have a history and have set a precedent for a certain-percentage settlement with each one of your creditors.
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 Relief.
Bankruptcy
Q: What Is Bankruptcy?
Bankruptcy is a federal program established to offer a way out of seemingly insurmountable debt. There are two types of personal bankruptcy. Chapter 7 allows discharge of debts without requiring payments to the court and usually allows keeping items like houses, cars, and household goods. Unfortunately, changes in the Bankruptcy Law have made it extremely difficult to qualify for Chapter 7, and most people end up in Chapter 13 (repayment plan). A Chapter 13 bankruptcy is for people who earn some money or who are delinquent on things they want to keep like houses or cars. Chapter 13 requires 36-60 payments to the court to repay the delinquency or debt, with the Court Trustee deciding that monthly payment amount.
You can determine the chapter appropriate for you by determining your gross income or by completing a federal means test. If you earn more than the mean income in the state you may still be eligible for a Chapter 7 if you pass the means test. If you fail them both you may end up with a Chapter 13 partial repayment plan. Compared to a Chapter 13, Debt Settlement is a less expensive and quicker way to get out of debt without the long term damage of having a Bankruptcy in your credit history.
Consumer Protection: Fair Debt Collection
Q: What debts are covered?
Personal, family, and household debts are covered under the Act. This includes money owed for the purchase of an automobile, for medical care, or for charge accounts.
Q: Who is a debt collector?
A debt collector is any person who regularly collects debts owed to others. This includes attorneys who collect debts on a regular basis.
Q: How may a debt collector contact you?
A collector may contact you in person, by mail, telephone, telegram, or fax. However, a debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves of such contacts.
Q: What types of debt collection practices are prohibited?
Harassment – Debt collectors may not harass, oppress, or abuse you or any third parties they contact. For example, debt collectors may not:
- Use threats of violence or harm;
- Publish a list of consumers who refuse to pay their debts (except to a credit bureau);
- Use obscene or profane language; or repeatedly use the telephone to annoy someone.
- False statements – Debt collectors may not use any false or misleading statements when collecting a debt. For example, debt collectors may not:
- Falsely imply that they are attorneys or government representatives;
- Falsely imply that you have committed a crime;
- Falsely represent that they operate or work for a credit bureau;
- Misrepresent the amount of your debt;
- Indicate that papers being sent to you are legal forms when they are not; or
Indicate that papers being sent to you are not legal forms when they are.
Debt collectors also may not state that:
- You will be arrested if you do not pay your debt;
- They will seize, garnish, attach, or sell your property or wages, unless the collection agency or creditor intends to do so, and it is legal to do so; or
- Actions, such as a lawsuit, will be taken against you, when such action legally may not be taken, or when they do not intend to take such action.
Debt collectors may not:
Give false credit information about you to anyone, including a credit bureau;
Send you anything that looks like an official document from a court or government agency when it is not; or Use a false name.
Unfair practices – Debt collectors may not engage in unfair practices when they try to collect a debt. For example, collectors may not:
- Collect any amount greater than your debt, unless your state law permits such a charge;
Deposit a post-dated check prematurely;
Use deception to make you accept collect calls or pay for telegrams;
Take or threaten to take your property unless this can be done legally; or
Contact you by postcard.
Credit
Q: What is a credit score?
A credit score is a complex mathematical model that evaluates many types of information in a credit file. A credit score is used by a lender to help determine whether a person qualifies for a particular credit card, loan, or service. Most credit scores estimate the risk a company incurs by lending a person money or providing them with a service — specifically, the likelihood that the person will make payments on time in the next two to three years. Generally, the higher the score, the less risk the person represents.
Q: Will ordering a credit report hurt my credit?
No. Consumers have the right to look at their credit report without it affecting their credit or credit score. When you request your credit report it’s called a “consumer pull” and has no affect on your credit. Only when you ask a possible creditor to inquire about your credit can it affect your score. For example, if you go out looking for a new car and you let a dealership request a copy of your credit report. That could affect your credit score because it implies you’re looking to open new lines of credit.
Q: How often do credit scores change?
Your credit score is a fluid number that changes as your credit report changes. Therefore, any change to your credit report could impact your score. However, most credit scores do not change more than 30 points in a quarter.
Q: Does having too many credit cards affect a credit score?
Having too many credit cards with either high balances or large amounts of credit available can negatively impact risk scores depending on the overall credit history.
