How does debt settlement and negotiation work?

Debt Settlement is what happens when you reduce the amount of your unsecured personal debts through creditor negotiations. At its core, debt settlement is the best option for a creditor to “lose the least” on accounts that default in payment. The process is largely predictable due to established timelines and bank policies which can and do vary from creditor to creditor. Debt settlement is a proven effective means to eliminate debt for the right person. For a more detailed explanation of what debt settlement is and why it works read: Debt Settlement – Why It Works

How long does the debt settlement process take?

It will vary. Debt settlements are reached and documented in as little as a few days. It will depend on how behind in payments you are, the creditor, what kind of money you have set aside to fund any settlements and what your financial goals are.

That is the short answer. What is rarely discussed by people and companies selling debt settlement services is “how long should a settlement program be allowed to go before it needs to be taken off the short list of options available”. The answer to this is not short and will vary for each person considering debt settlement. For the past decade people and companies have been offering debt settlement programs to the public promoting time frames that are easier to sell, but more of a crap shoot. In our experience the longer your debt settlement programs takes, the more it becomes a gamble. If you need a few years to complete a settlement program, you will often find you should not even start down the settlement path and seriously consider bankruptcy instead.

If rapid completion sounds impossible to you, you may be right. Then again, you just may not know what you need to about the process of debt settlement. You may have talked with one or more people who have misrepresented the whole thing. You may have read some poorly crafted information online. You may have gotten bias input. Also consider, it is often the high fees charged by most professionals offering their assistance that leads to longer program lengths. Affordable & fair fees may make quicker less risky program well within reach!

The best advice we can give about whether or not debt settlement will work for you would be to learn all the details as they would apply to your unique set of circumstances by enrolling as a CRN member. We offer the most affordable and comprehensive upfront details and you get to work one on one with a debt and credit specialist. You can get started as a CRN subscriber by clicking here: CRN Membership Enrollment.

Will debt settlement affect my credit score (FICO)?

Yes, as will every other option available to someone who cannot maintain timely payments on their debt.

More often than not, being in debt, especially overwhelming debt, your credit accounts already have, or are about to negatively affect you. Depending on how long you have been delinquent in payments, negotiating and settling these debts for good can have an overall positive effect on your credit score. Access to new credit products can be easier obtained when you don’t have delinquent and outstanding debts. Settled accounts and/or zero balances are seen as “positive” when compared to unresolved debts.

Your major concern should be dealing with the debt first! Credit can recover. You can learn more about how the different debt relief options affect your credit without the spin by reading:  Debt Relief vs. Credit Report

Or read the real life experience of a CRN member interviewed by the Detroit Free Press:  Debt Settlement in Michigan

Will I be able to get credit in the future?

Yes. It is always recommended to plan ahead for your credit needs. Here again we recommend reading: Debt Relief vs. Credit Report

Can I really negotiate my debt with my creditors myself?

Yes! Debt settlement isn’t rocket science. It’s just that there is a formula to follow to optimize your results. Most people are skeptical when they first hear about do-it-yourself or DIY debt settlement. There is no shortage of sales people out there who reinforce the idea that only a pro should handle your settlements. They only get paid, after all, if you hire them. Most of the people “selling” debt settlement could not settle their way out of a wet paper bag. They enroll you – get their commission – then hand you off to a back end service provider.

The truth is: You Can Settle With Your Creditors! When you understand how the whole collection and settlement process works coupled with up to the moment policies with each of your creditors, it becomes simplistic and straight forward. You also save a ton in fees! This is why CRN’s focus since our inception has been to start every member off with the tools and ongoing support needed to complete a DIY debt settlement program. Maybe you really want a pro to do the settlements for you? That’s fine. We connect you with experienced negotiators and attorneys who only charge for settlements when they are completed and the rate for full service is 15% of the savings achieved!

At Consumer Recovery, we believe everyone should be given the opportunity to know what the pros know and then make up their mind. Many of our members appreciate that. You will too!

For a more detail read: DIY Debt Settlement

Will I still be able to use my credit cards?

No, not the ones you intend to settle.

What does debt settlement and negotiation cost?

Some Debt Settlement Companies charge several thousands of dollars to settle your debts for you. Over the years many settlement firms have come up with varying methods for charging fees. One thing that has not varied much is – the fees are too high! Many hundreds of thousands of people over the past several years seem to have no problem getting sucked into paying too much. However, many people did not understand they were paying these high fees due to how the fee schedule was disguised, not fully explained or hidden in the fine print of service contracts.

The Federal Trade commission published new rules in 2010 that ban any up-front fee for direct debt settlement services. There are limited exceptions to the rule. Generally, fees are now charged based on success only, which is how CRN has always done it. Even with the new FTC rules that affect when settlement companies get paid, it did not impact how much they can charge. Some states have put laws in place to cap fees. Illinois for example capped fees at 15% of savings. Coincidentally that is what CRN has charged since 2006. At the time of the rule changes we predicted that companies would still charge 15 to 20% of the debt enrolled, or when charging on a performance basis, set fees at 25 to 30 percent of savings. We were right. Some companies even charge 40% of savings! How they get customers to agree to that is a mystery to us. Settlement sales people get paid pretty well. Maybe they are just that good at selling.

Here is what you need to consider:

The fees you pay to a debt settlement service provider will directly relate to how long it will take you to be successful and ultimately if you should even consider debt settlement at all.

We strongly encourage you to only engage a company offering settlement services whose fees are based on SUCCESS, and also to look for firms who do not charge high fees. CRN offers education and ongoing support to help you settle your own debt, and if you want a pro to handle it you only pay 15% of savings. We don’t have much competition currently, but there are a couple companies out there who charge fair fees.

Be careful of how you might get referred to a settlement company. Often times the person referring you to a company has captured your attention through some form of online messaging. They may have credibility and are able to gain your trust. Most have a financial incentive for referring you. This is pretty standard. There are many forms of cross affiliation in the debt relief industry. It’s when you get sent over to a company where the criteria for the selection of where you are sent for help is based on who pays the referrer the most that is most concerning. The fact that people who know better refer consumers to companies with high fees is discouraging.

For some fun reading on this topic, read: Dude Meets Debt Wall

Also recommended: Debt Settlement – The Gist, The Juice & the Lies

Are your debt settlement products guaranteed?

Yes. We have a guarantee for CRN Members. CRN basic education subscribers are guaranteed to receive value for the $99.00 enrollment costs or your money back. I would say no questions asked, but we will ask you to tell us where we fell short of your expectations so that we can improve ourselves for the benefit of all. You do, of course, get the guarantee and a prompt return of your money whether you participate in the survey or not.

When it comes to guaranteed settlement results however, there can be no guarantees. If anyone is offering one to you – become skeptical of whom you are dealing with.

Guarantees have long been used when offering products and services to the public in two ways; by those who are supremely confident in your satisfaction with the product or service they offer, or by those whose only goal is to get you in the front door and satisfaction be damned. Due to all of the negative press the debt settlement industry has earned over the years, you be the judge of which category a company offering guaranteed results would fall into.

CRN will guarantee that when you work with us and partners in our network who perform direct settlement services on your behalf – you will not pay a fee unless we get you a deal in writing that you like and then fund!

Is my personal information kept private?

Yes, absolutely. You do have to authorize someone to give and receive information on your behalf when negotiating credit accounts with each individual creditor. There are instances where we will refer you to network partners when you request it. There are instances where we may aggregate data as part of a study (keeping personal identifiers out). Regardless, you would authorize any of this activity before it would occur.

Will creditors or debt collectors still be contacting me about my debt(s)?

Collection calls are simply part of the process. Our program includes options you can use to reduce unwanted collection calls to a minimum without causing a bad reaction from your creditors.

WARNING: Many companies send out letters to your creditors instructing them to cease communication with you. This is a harmful business practice! It is important that you allow for some contact with creditors and even collectors. If they cannot contact you they are left with the most aggressive tactic for collection, the courts.

Collection calls, for some, will seem to be the most burdensome part of the process. The goal of the collector is to get any type of payment from you that they can. They have proven willing to cross the line when doing so. Our program will show you what to watch out for and recognize as abuse. Should collection abuse occur, you can be referred to a consumer attorney familiar with taking the collection industry to task on violations of state and federal laws that exist to protect you.

About the only legitimate and immediate way to stop collection calls is by hiring an attorney to represent you in bankruptcy. Calls do stop if you go this route.

Is it true that there are sometimes tax consequences to settling a debt for less than the original balance?

Yes. If you have a debt that is settled for less than the original balance, and the difference (the forgiven portion of the debt) is greater than $600.00, the creditor is supposed to send you a 1099c, which would then be reported as income.

The IRS does allow you to write off any income from forgiven debts up to the amount by which you were insolvent at that time. Unless you had a positive net worth at the time that you settled an account, which for many is unlikely when buried in debt, then you generally wouldn’t have to pay any taxes on the forgiven debt(s). Always consult a tax attorney or tax adviser for options that can be applied to your specific circumstances.

Incidentally, if you do wind up owing taxes, it is because you saved money. So, keep that in perspective. In the same way that you would budget and set aside funds to settle with, if you are solvent and owe tax on forgiven debt, you must also budget to pay the taxes.

For more detail, please visit:

http://www.irs.gov/individuals/article/0,,id=179414,00.html

http://www.irs.gov/pub/irs-pdf/f982.pdf

What types of debt(s) can be settled?

Most any type of unsecured debt can be settled. For example:

• Consumer debt
• Credit card debt
• Business and/or commercial debt
• Slow or late payments
• Defaults
• Charge offs
• Accounts placed with a debt collection agency and/or attorney debt collectors
• Medical bills
• Deficiency balances
• Store credit cards
• Major credit cards
• Pre judgment and post judgment settlements

To best determine which of your accounts can be settled and the current trends with each of your creditors, you should get started as a CRN subscriber by clicking here: CRN Membership Enrollment.

Can my wages be garnished?

Debt Collectors can be intimidating and may use questionable tactics that are designed to scare people into making a payment, even if you cannot afford to make one. Actual garnishment actions are not that common and you will have advance warning. Creditors must first file and serve you with a lawsuit, get a judgment, and then get court authorization for a garnishment. You cannot just have your pay check, or any portion of it, taken without court approval, and you must receive notification and proper documents from the court first. Worst case scenario, you may need to negotiate a settlement that is higher than you would have liked, or commit to a payment plan in order to avoid a garnishment.

If you are being garnished, you typically can only be garnished for one debt at a time. Creditor pile-on is not allowed. If you are being garnished now, and have a line of creditors waiting to get paid behind that one, you should speak with a bankruptcy attorney to determine how that will assist you in getting back in control of your finances.

Can I be sued if I use the debt settlement approach?

Creditors have the right to file a lawsuit if you are not paying a debt. This is one of the biggest concerns you should have before determining if debt settlement is something you should attempt.

Given how many accounts fall delinquent each year, lawsuits in order to collect are not that common. Don’t let this statement lead you to think it won’t happen to you though. Being sued means you will have to address that specific debt as a priority to settle before it becomes a judgment. Settling a lawsuit out of court and avoiding judgment is quite normal, but the rate of savings will generally not be as good as when settling debt that is not in the courts.

If you are only marginally suited to try debt settlement as a means to avoid bankruptcy and you get sued early on, it may become a show stopper. You may then have to file bankruptcy due to not being able to fund an out of court settlement, or have to agree to a payment plan that will hinder your ability to save money to settle with other creditors later on. This can and does snowball into delays in settling other debts which can then lead to more lawsuits.

This is good context for the question above “How long does the debt settlement process take?”.

Further:

Threats of litigation are very popular, regardless of the fact that debt collectors are prohibited (by the FDCPA) to threaten legal action unless they’re authorized to do so. This does not stop collectors from making the threat. You will need to know which threats are credible and which are part of typical (and unfortunately abusive) debt collection efforts.

There are not many emergencies in debt relief. Heading off a judgment, or dealing with one already in place before bank accounts are levied and pay checks garnished, is one such emergency.

Consider getting started as a CRN subscriber by clicking here: CRN Membership Enrollment. We can help you calmly evaluate what your best options are and the next best steps to take – and its affordable!

Can I still settle my debt if I’m currently being sued by a debt collector or creditor?

Yes. It is still possible to come to acceptable settlement terms during litigation or after a judgment has been filed.

Do you work with business or commercial debt?

Yes, we can assist companies and small businesses seeking debt relief.

How do I get started with debt negotiation and settling my debt?

Your first step will be enrolling as a CRN Member so you can learn in detail what and how debt settlement will work in your particular circumstances. Negotiating and settling debts may not be right for you. You may be better off getting monthly payments reduced through available hardship plans, or enrolling in a debt management plan. You may learn that, while you would like to avoid bankruptcy, it is actually the best strategy given your situation. CRN membership gives you access to all methods for debt intervention and fairly priced products and services.