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Debt Settlement (also referred to as debt negotiation) is a process whereby 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. Settlement is one of the most effective choices available to consumers, especially 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? 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. In this case, they may get nothing! Therefore, they are usually willing to settle for a lower amount, given your hardship, than risk getting nothing at all.
What Makes Mea Good Candidate for Debt Settlement?
A debt settlement program is not the right financial choice for everyone. To qualify for our program, clients must demonstrate a legitimate financial hardship, which has caused them to fall behind on their payments to creditors or will cause them to fall behind in the near future. It is also important to know that we mainly work with unsecured debts, although we can help with some secured ones. We take on consumers who are truly in need of our services and stand to significantly improve their financial situation with our program.
Why should I use National Debt Relief to settle my debts as opposed to handling it myself?
Unlike someone who may be reaching out to a creditor for the first time, our experienced debt negotiators have developed well-established relationships with both creditors and collection agencies. They have a lot of experience in working with creditors and are familiar with the ranges in which the debts may settle. In addition, our IADPA certified staff is familiar with issues that can arise when creditors aggressively attempt to collect debt and are always ready to help.
Who is holding my money while I’m waiting on a settlement?
You are, as your settlement savings funds will be held in a program dedicated account that is FDIC-insured. As you progress through the program, you will make regular transfers to your program account, usually held through Global Holdings, an industry leader in this type of account. If you would prefer, you may choose a different dedicated account provider. This program account will be opened specifically for you, with you having ultimate control over its funds. The funds for settlement that are collected in this account get disbursed only once you agree to the terms of your settlement.
Should I keep paying my credit card bills?
Clients who enter our program are suffering from tough financial hardships that often don’t allow them to continue paying their bills. While we do not advise you to stop paying your credit card bills, it is important to note that if you continue making your payments, we will have less leverage when negotiating with your creditors as continued payments lead creditors to believe your financial situation is stable. If you are able to make payments to your creditors, as well as cover all of your other expenses, then our program may not be right for you.
Do I have to include all my debts into a debt settlement program?
In order to enhance the success of the program, we strongly encourage that all of your qualified debts be enrolled into the program. Your debt consultant will walk you through the enrollment process and highlight the potential pros and cons to leaving out a qualified debt.
How Will Debt Settlement Affect My Taxes?
In the finance world, solvency is a term that is used to refer to the current level of financial stability associated with a company or individual. To be solvent means that you are in a position where it is possible to honor all of your current financial obligations, while still having assets left over for other purposes.
To put it simply, insolvency is the inability to pay one’s debts once they are due. In many cases, insolvency has a negative connotation, but when discussing paying taxes on forgiven debt, this can be a beneficial financial situation. An individual or business that is insolvent may have their forgiven debt excluded from their income, and thus not be required to pay taxes on it. To learn more about the effect that debt settlement can have on your taxes, please consult the IRS or a tax professional.
How is debt settlement different from bankruptcy?
Bankruptcy is an option that is generally treated as a last resort. It will remain on your credit report for 10 years and you can be denied employment, state licenses, insurance, as well as tenancy of an apartment. Most importantly, you can be denied virtually any type of credit with a bankruptcy on your report.
In addition, recent changes to bankruptcy laws have made it harder to qualify for Chapter 7, the bankruptcy method whereby you liquidate your assets to eliminate your debt. Furthermore, even when you declare bankruptcy, you will not be allowed to discharge alimony, child support, taxes, student loans, judgments, or any loan on the bankruptcy petition. Under Chapter 13 bankruptcy, your debt payments are simply restructured meaning you will still have to pay a percentage of your debts while you suffer the consequences of bankruptcy.
Debt settlement is an alternative to bankruptcy. Only a licensed attorney can provide you with the advice and guidance specific to your situation relating to bankruptcy in comparison to debt settlement.
What types of debtcollection practices are prohibited?
Harassment: Debt Collectors may not harass or abuse you*. For example, debt collectors may not:
Use threats of violence or harm against the person, property, or reputation;
Publish a list of consumers who refuse to pay their debts (except to a credit bureau);
Use obscene or profane language;
Repeatedly use the telephone to annoy someone;
Telephone people without identifying themselves;
Advertise your debt.
False Statements: Debt Collectors may not use any false statements when collecting 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.
*We are not attorneys or a law firm and cannot provide legal advice. Any description on this website of debt collection laws are based on general public sources and discussions. Please consult a legal professional for specifics regarding state and federal debt collection laws.
Where can you report a debt collector for an alleged violation?
Report any problems you have with a debt collector to the office of your state attorney general and the Federal Trade Commission. Many states have their own debt collection laws and your state attorney general can help you determine your rights.
What must the debt collector tell you about the debt?
Within five days of initial contact, the debt collector must send you a written notice telling you the amount of money you owe, the name of the creditor to whom you owe the money, and what action to take if you believe you do not owe the money.
Who is a debt collector?
A debt collector is any person, other than the creditor, who regularly collects debts owed to others. Under the 1986 Amendment to the Fair Debt Collection Practices Act, this includes attorneys who collect debts on a regular basis.
How may a debt collector contact you?
A debt collector may contact you in person, by mail, telephone, telegram, or fax. However, a debt collector may not contact you at unreasonable times or places. In addition, a debt collector may not contact you at work if the collector knows that your employer disapproves of contact there.
May a debt collector continue to contact you if you believe that you DO NOT owe money?
A collector may not contact you if, within 30 days after you are first contacted, you send the collection agency a letter stating you do not owe money. However, a collector can renew collection activities if you are sent proof of the debt.
What debts are covered by these consumer protection laws?
Your personal, family, and household debts are all covered under this Act. This includes money owed for purchase of an automobile, for medical care, or for charge accounts. Click here for a full list of qualifying and non-qualifying debts.
What control do you have over payment of debts?
If you owe more than one debt, any payment you make must be applied to the debt you indicate. A debt collector may not apply a payment to any debt you believe you do not owe.
What can I do if I believe that a debt collector violated the law?
You may have the right to sue a collector in a court of law. If you win, you may recover money for the damages you suffered and, in certain jurisdictions, you may recover statutory damages. In addition, in certain jurisdictions court costs and attorney’s fees may also be recovered. Only a licensed attorney can advise you on your legal rights.
May a debt collector contact anyone else about my debt?
A debt collector may not contact third parties, except only to find information on where and how to contact you. Collectors usually are prohibited from contacting such permissible third parties more than once. In addition, the collector may not tell anyone other than you (or a co-signor) that you owe money or that they are a debt collector.
What does the Fair Debt Collection Practices Act Cover?
This Act covers the relationship between creditors or debt collectors and debtors. If you use credit cards, owe money on a personal loan, or are paying on a home mortgage, you are a debtor. If you fall behind in repaying your creditors, or an error is made on your accounts, you may be contacted by a debt collector. You should know that in either situation, the Fair Debt Collection Practices Act requires that debt collectors treat you fairly by prohibiting certain methods of debt collection. Of course, the law does not forgive any legitimate debt you owe. This section answers commonly asked questions about your rights under the Fair Debt Collection Practices Act. Remember, only a licensed attorney can advise you on your legal rights.
Summary of Illegal Actions
The following actions are illegal*:
A debt collector calls you at work and knows that it is inconvenient or that your employer forbids it.
A debt collector calls you before 8:00 a.m. or after 9:00 p.m. in your time zone.
A debt collector makes an excessive number of phone calls to annoy or harass you.
A debt collector knows that an attorney, whose contact information is known or is easy to locate, represents you and the debt collector continues to contact you.
A debt collector tells a person other than you, your spouse, or your attorney that you owe money. (If you are a minor, the debt collector can tell your parents or guardians about the debt.) Debt collectors can only communicate with other people to obtain contact information about you.
A debt collector misrepresents the amount, character, or legal status of a debt.
A debt collector gives others credit information about you that is false, or should be known to be false.
A debt collector fails to honor your dispute or cease communication rights.
A debt collector threatens to take your property or garnish your wages when this action would not be legal or the debt collector does not actually intend to do it. Your property cannot be taken and your wages cannot be garnished without a court order (judgment).
A debt collector uses, or threatens to use, violence or any other illegal means to harm you, your family, your reputation, or your property.
A debt collector uses profane or obscene language when communicating with you.
A debt collector threatens you with criminal prosecution or implies that you have committed a crime. Debt and credit issues are matters of civil law, not criminal law.
A debt collector tricks you into accepting charges for collect calls, telegrams, a C.O.D., etc.
A debt collector cashes, or threatens to cash, a post-dated check before the date written on the check, if the check is post-dated by five days or more.
A debt collector does not give three to 10 days advance notice before cashing a check that is post-dated by five days or more.
A debt collector claims to be an attorney or sends a letter made to look like it is from an attorney (unless the debt collector really is an attorney).
A debt collector sends a letter that is made to look like a government or court document when it isn’t.
A debt collector sends a government or court document that is not recognizable as such.
A debt collector threatens any action against you that is not legally feasible or that the debt collector does not intend to take.
*The summary herein is based on public information that describes the Fair Debt Collection Practices Act. Please consult an attorney for legal advice and more information on the Act as well as your rights under state and federal law.
Who is AFCC?
AFCC (The American Fair Credit Council) is the leading association of professional Consumer Credit Advocates. This organization supports fair and consumer-protective legislation for the debt settlement industry. AFCC members are held to the strictest Code of Conduct in the industry.
There is legislation in some states that places restrictions and requirements on any form of debt settlement and debt management services. Because both the federal and state government both regulate debt settlement, it’s important that you visit here to find out if we are able to legally provide services in your state.
What are our fees?
We do NOT charge any upfront fees. All of our fees are included in your monthly program payment that is deposited into your FDIC insured account. In addition, you won’t be charged any fee until your debt has been settled and at least one payment has been made to your creditor under the terms of the settlement. Actual fees vary state by state and debt amount. Please contact one of our debt consultants for more information.