What is Debt Negotiation, Debt Settlement and/or Debt Restructuring?
Debt Negotiation is when your creditor agrees to accept less than you owe to satisfy your debt. This process usually involves negotiations between the consumer and his or her creditors to resolve unsecured debt for less than the full balance. These negotiations are often conducted on behalf of the consumer by a professional debt negotiator.
Where does a Debt Negotiation company fit into my debt resolution goals?
Debt Negotiation can be an outstanding debt relief option for people who cannot afford Consumer Credit Counseling, but also want to avoid bankruptcy. A Debt Negotiation company will customize a savings plan that fits your financial situation and help you set-aside funds to pay off settlements. Due to a Debt Negotiation company’s lack of emotional involvement with your accounts, you can be sure that their negotiating position is objective and effective. When you hire a Debt Negotiation company to negotiate on your behalf, you normally deposit money into a savings account each month. Once enough money builds up in your savings account, the Debt Negotiation Company uses those funds to obtain a settlement with your creditors for less than the outstanding balance.
How much money can debt negotiation save me?
Each debt negotiation client is unique, and your results will vary. Settlement savings will depend on who your creditor is or what type of debt you have. Settling your debt for less than was originally owed is typical, however, we follow industry best practices and never promise a % of savings up front. You should be leery of these promises, because a number of factors persist and final savings is not something that a debt settlement company can guarantee up front. We will be able to offer more specific responses once we understand the extent of your debt, it’s age, and the current delinquency rate.
How quickly can I be out of debt?
The amount of time it takes to get out of debt greatly depends on your situation. A professional Debt Negotiation program usually takes 36 to 48 months to resolve all enrolled debt accounts. Program terms may also be extended past 48 months based on the individual facts of each Client. The time it takes to complete a Debt Negotiation program also depends on how much debt you have, how much money you have to negotiate with, and the status of your debt accounts. Some settlements can take time because it is essential to let your accounts age. It is also important to let your negotiation funds accrue enough to offer a settlement to your creditors. If at any time while enrolled in the program you find yourself able to add additional funds towards settling your accounts, it will certainly expedite the process and the program term should be reduced. Please be aware no debt relief firm can guarantee you will be debt free within any specific time frame and all program terms are estimates only.
Why would my creditors agree to accept less than the amount I owe them?
Your creditors prefer to collect the full amount you owe; however, they know that if you file bankruptcy, they may get nothing at all. Because of the possibility of taking a total loss, creditors are usually open to debt restructuring, especially once they recognize the financial hardships you are facing. In other words, your creditors would rather accept a lump sum payment of less than the full balance owed than risk getting nothing at all.
How does Debt Negotiation differ from credit counseling?
Consumer Credit Counseling Agencies (CCC) are organizations that provide counseling services to help you budget and organize your finances so you can pay back your debt. CCCs work to lower your interest rate so you can pay back your creditors. While some CCCs may do a good job of orchestrating a repayment plan, more commonly known as a Debt Management Plan (DMP), many of them often are funded by the very creditors you are trying to settle with. So, you may end up with a repayment plan that is in your creditor’s best interest and not your own.
A Debt Negotiation company is funded entirely through the fees it collects from clients, so they work entirely for you, not your creditors. A Debt Negotiation company will negotiate settlements with your creditors rather than keep you in the minimum payment, debt cycle where you will likely get nowhere.
Should I consider bankruptcy?
Yes, it may be in your best interest to consider bankruptcy, although you should investigate all other avenues of debt relief before you do consider bankruptcy. Bankruptcy can eliminate all of your debt, but the consequences of bankruptcy may outweigh its benefits. Because each consumer’s individual circumstances are different, doing a thorough investigation of each debt relief option is highly recommended to ensure the proper debt relief program is being utilized. Also see the Bankruptcy section of our website to read more about types of Bankruptcy.
Can I still file a bankruptcy if I try the debt settlement and it does not work?
Yes, but the money you will have spent on the credit card debt settlements prior to you filing the bankruptcy will be gone. Many consumers that explore filing for Bankruptcy chose to enter a Debt Negotiation program first in an attempt to avoid filing. For some people this is a smart choice, for others, it may not. All in all, you may certainly still file for Bankruptcy if for any reason Debt Negotiation does not work for you. Some examples of situations that may cause a consumer to cancel from a Debt Negotiation program and file for Bankruptcy include loss of wages, illness & change is a creditor account status.
What about debt consolidation?
Debt consolidation is when you combine all of your various debts into one large debt and you attempt to borrow your way out of debt. The most common debt consolidation loan is a home equity loan, since most consumers in a financial bind do not qualify for an unsecured loan. Home equity is the fair market value of your home minus what you still owe on your house. Consumers typically take out a home equity loan to help pay off other credit card bills, but this loan just moves the debt from unsecured accounts to a loan that is backed by their house to a secured debt. A debt consolidation loan secured with your home is very risky, because you could end up losing your home if you are unable to pay the loan back.
For instance, if you take out a home equity loan and cannot afford to repay your lender, you could face foreclosure and eventually lose your home. Many consumers who chose a debt consolidation loan end up charging new debt on their credit card accounts, which increases their overall debt burden and chances for encountering financial difficulties. Debt consolidation may be an appropriate debt relief solution for some, but it may be in your best interest to investigate other debt relief options first. You should be very cautious about changing unsecured debt into secured debt.
Are there any adverse things I should know about my Debt Relief options?
Each Debt relief option that exists may have positive and negative aspects. For the most part, each positive and negative aspect is going to be reliant on each Consumers specific situation. For example, Bankruptcy may stay on your credit as a public record for 7-10 years and may impact you from obtaining employment, obtaining new loans or credit or prevent you from leasing a home or vehicle. On one hand, this may seem like a lot to digest. On the other hand, for the appropriate person, the benefits a Bankruptcy may provide will outweigh the adverse impacts and will be the right thing to do. Debt Negotiation will adversely impact your credit rating while you are attempting to resolve your debts. While enrolled in a Debt Negotiation program, you will receive calls from creditors attempting to collect on the owed debt. In addition, creditors could choose to file a lawsuit to assist in attempting to recover defaulted debt. Credit Counseling may show up on your credit as being enrolled in a “Credit Counseling” program and in some cases will prevent you from obtaining a home refinance or new credit.
As you can see, each Debt Relief option will have pros & cons. Once you are educated on each available Debt Relief option, you can make a more informed decision as to what is best for your particular situation. Debt Support Center, Inc. will give you the information you need to make this decision and help you each step of the way.
Who qualifies for a Debt Negotiation program?
Not everyone qualifies for Debt Negotiation or debt restructuring. Generally, Debt Negotiation is an alternative to bankruptcy for people with overwhelming debt who have endured personal or financial hardships that prevent them from fully repaying their creditors. Typically, most Debt Negotiation companies require that you have at least ten-thousand dollars ($10,000) in unsecured debt (debt that has no collateral, like a home or automobile, attached to it) and are experiencing a legitimate hardship, such as unemployment, illness or other situation that has compromised your ability to repay your debts, or sometimes just barely make minimum payments. Upon enrollment, Debt Support Center, Inc. would perform thorough intake verification with each consumer to ensure accuracy, affordability and a complete understanding of how the program works.
Who doesn’t qualify for a Debt Negotiation program?
While each Debt Negotiation company may have a different set of qualifications for their program, most companies require their clients to have at least ten-thousand dollars ($10,000) of unsecured debt, and have, or are experiencing a legitimate hardship. Typically, people who do not qualify for Debt Negotiation either do not have enough debt, the wrong type of debt, or have too much or too little income as compared to their expenses. If you do not qualify for debt restructuring, it may serve your best interest to investigate other debt relief options such as Consumer Credit Counseling or Bankruptcy.
What types of debts qualify for a Debt Negotiation program?
Typically, only “unsecured” debts qualify for a Debt Negotiation program. Unsecured debt is debt that is not “secured” by collateral, such as a home or automobile. Credit card debt is the most common type of unsecured debt. The amount of debt you owe may also play a significant factor in qualifying for debt restructuring. If you have ten-thousand dollars ($10,000) or more of unsecured debt (such as credit card debt), you are experiencing a financial hardship and you want to avoid bankruptcy, then you might qualify for debt restructuring.
Below are examples of unsecured debts that typically qualify for debt restructuring:
- Unsecured Debt
- Credit Cards
- Medical Bills
- Personal Loans
- Department Store Credit Cards
- Unsecured Bank Loans
- Bank Overdraft & Associated Fees
- Gasoline cards
- Jewelry Store Loans
- Furniture Store Loans
- Repossessions (Deficiency Balance)
- Business Debt (Restrictions Apply)
- Computer Loans
- Judgments (Must Be Uncollectable For At Least 12 Months)
- Finance Companies
- GE Money
- Care Credit
- Pay Day or Cash Call Loans
**Acceptance of any particular debt is dependent upon the individual facts and circumstances and approval of a lawyer. Debt Support Center, Inc. reserves the right to accept or reject any debts upon enrollment.
Can’t I negotiate a settlement on my own?
You can certainly attempt to negotiate a settlement on your own. But, if you do, make sure you do it right, as we receive many horror stories from consumers who were taken advantage of by their creditors. Our highly trained negotiators have years of experience negotiating and securing excellent settlements with creditors and debt collectors. Furthermore, we believe that our law firm affiliates stand out in creditor’s eyes as honest and reputable law firms that do not enroll unqualified clients (e.g. those consumers who have the ability to fully repay their unsecured debt) and also creditors know that our affiliate law firms process their settlements efficiently reducing time and collection cost for the creditor.
To successfully negotiate and settle debt on your own (among other important things) you need to understand the collections process, differences between various creditors and the right time to begin negotiations and agree to settlements. You must also understand how a settlement agreement is structured to make sure the agreement clearly spells out the negotiated settlement.
Debt Negotiation is a complicated process. If you’re not sure you have the knowledge, organization and self-discipline, you may want to leave it to professionals. Even if you have the time to learn how to save up, negotiate and settle your debts, you may still have some emotional attachment to the debt which could interfere with your objectivity. Professional debt negotiators maintain an objective position with the debt they settle, which means they are less likely to be intimidated by debt collectors.
If you find yourself struggling with debt, you deserve to know what debt relief options are available to you and your family. Contact Debt Support Center, Inc. today to receive a free consultation and find out what Debt Relief options may benefit you. Call (855) 600-8681 or fill out our online form and a representative will contact you.