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we
offer in-house debt settlement, and through affiliates, we
offer counseling on several programs which are available
to give you help to stop debt, get credit card debt help,
credit
card relief, consumer credit counseling, debt settlement,
and all types of consumer debt help.
Debt settlement
can be a significant advantage for certain customers.
We believe that a successful debt settlement program can usually get people out of debt faster and with less damage than other programs. We urge our customers to explore their options. The following information is not intended as legal advice but to provide you with a list of possible alternatives to Debt Settlement. For an estimation of costs and time to complete a particular program please refer to our Debt Settlement Calculator. Or, contact one of our specialists to help you with an analysis. |
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How debt settlement works
Should you need and qualify for debt settlement, We can work diligently to negotiate
a reduced amount less than what you currently owe, typically between 25-40% of
the original amount, and set you up with a realistic monthly payment plan based
upon your specific circumstances. Before we can begin negotiating with your creditors,
you will need to put aside money to save every month. Based upon what you are
able to pay each month into your debt reduction savings account, we can determine
how many months you will be part of the program, and ultimately complete the
program and settle your debts. Throughout the program, we can help become the
main communicator with your creditors, and we will guide you in dealing with
burdensome phone calls and letters.
Saving sufficient funds in a settlement
account under your name, and under your control,
will allow ACA to begin negotiating with your creditors. The
amount you will need to save depends on your particular financial
situation, and we can help you determine how much you will
need to save each month.
Debt settlement works by reducing
the amount of money you owe through negotiation with creditors. This
means that your balance owed, which is also called the principle,
could actually go down over time before you even pay anything
toward
it. Debt settlement is an appropriate option for people
who may otherwise be considering bankruptcy due to some type
of financial hardship. Creditors are usually willing
to settle for less than the amount owed when a person is
under financial strain because if the person is forced to
declare bankruptcy, the creditors may receive nothing.
Our Certified Debt Consultants will review all of
your options and discuss with you why debt settlement should
be one of them.
Debt Settlement can
help keep you from declaring bankruptcy. It can give
you credit card debt help. It can give you debt relief
with all your unsecured debts.
You will be able to keep
your financial matters private. A bankruptcy declaration,
on the other hand, goes into
public record.
With the exception of
our fee, you are in control of your money at all times.
In most cases, you can
be debt free in 2-3 years through successful completion of
the program.
Debt settlement will help you to pay unsecured debts, like credit cards. Unsecured
Debt refers to any type of debt that is not collateralized (collateral is a
borrower's asset that is forfeited to the lender if the borrower is unable
to pay back the principal and interest on the loan). Secured debts like
student loans, vehicle loans, and home mortgages don't qualify.
One of the best things about debt
settlement is that you control what happens to your money,
with a little guidance from our staff. During the time
you are part of our program, we will set up a debt
settlement account in your name at Rocky Mountain Bank. With
the exception of our fees, only you have access to
your funds. We will then work with you to
set up a monthly payment plan that you can afford. This
monthly payment will go into your special debt settlement
account. When you have accumulated enough money in
this account to pay a reasonable amount toward the balance
of a debt, we then make an offer to your creditor. If
we negotiate settlement offers for less than 50% off the
original balance, you will have funds remaining in your trust
account once your program is complete. If we receive
any offers higher than 50%, you may need to provide additional
funds beyond the schedule we provided. After we reach
a settlement with a creditor, you will pay the reduced balance
out of the debt settlement account. We will do this for each
creditor, one at a time, until the debt is gone.
Once you decide to sign up with us, you will begin making monthly payments
into your debt settlement account. All of the money you have available for
paying your debts will go into the settlement account. It is important
for you to understand that if you don't make at least the minimum payments
on your debt, your credit will be affected. Your creditor might report
negative information on your credit report, and/or take action against you,
including filing a lawsuit.
Debt settlement isn't for everyone because it attacks the problem more
aggressively than other programs. We need you to know that debt settlement
will lower your credit score. But, your current high debt may also lower your
credit score. Reducing your overall debt will benefit you in the long run.
While debt settlement will lower your credit score, it will get you back in
order financially so that you can build that score up again. Why wouldn't’t
you want to improve your current situation?
You will need to pay taxes on the amount of money that you save through the
use of debt settlement. This means that if you owe $5000, and our staff
talks the creditor down to a balance of $2000, then you will be responsible
for taxes on a portion of the remaining $3000. This may seem alarming
to you, however think about it in terms of taxes versus interest. If you had
eventually paid off all of your debts in full over a longer time frame, you
would have paid a significant portion in interest to the creditors. Usually,
the amount you will need to pay in taxes after debt settlement is significantly
less than the amount you would have paid in interest. We encourage you
to consult a tax advisor if you have additional questions. In some cases
you may be eligible to file a 982 form and not have to pay taxes on the amount
saved.
You may indeed be able to settle your own debts. However, haggling with
creditors can be difficult for some people in debt. Creditors have highly
skilled negotiators working on their side, waiting to take advantage of any
irrational misstep you might have. They don't want to lose any of their
money. Our professional debt settlement staff knows how to sidestep their
strategies. We have established relationships with many credit card companies.
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Bankruptcy
Filing for bankruptcy has serious consequences
and should not be entered into lightly. Having your debts erased
may not solve your long-term financial goals. Filing
for Bankruptcy regardless of whether you file Chapter 7 or
Chapter 13 may have long lasting negative effects on your credit
history for up to 10 years. The negative marks of bankruptcy
on your credit may make it difficult to apply for future credit,
secure jobs that require a positive credit profile, rent an
apartment, purchase a vehicle, etc.
There are two basic types of bankruptcies that apply to most individuals;
reorganization (Chapter 13) or liquidation (Chapter 7).
Chapter 13
During a reorganization bankruptcy, you are required to file a repayment
proposal with the bankruptcy court. Some debts must be repaid
in full, some are repaid as a percentage of original debt, and others
aren't repaid at all. In general, Chapter 13 requires
you to pay back your secured debt and as much of your unsecured debt
as
possible. During the repayment period, the court will place restrictions
on how you can spend money. In many cases, a set amount will
be garnished from your wages and a trustee of the court will make the
payment to your creditors.
In a liquidation bankruptcy, you must turn your personal property (with
a few exceptions) over to the court, which sells it and uses the proceeds
to pay your debts. Recent changes in bankruptcy law have made this
type of filing much more difficult:
- You must pass a Means Test, which includes
review of your income. Even if you pass the first part of
the Means Test and you have an income lower than your state's
median, there is an additional test for your expenses which
places severe restrictions on your spending.
- There are residency requirements.
- You will be required to take mandatory
credit counseling and financial education by government-approved
programs.
- New laws place a heavy burden on you
to document income, expenses as well as other various forms
and filings within 45 days of the filing.
Finally, you may need to turn to a bankruptcy
attorney, which may turn to be costly.
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Organizations who help consumers with debt problems usually refer to
themselves as credit counseling services. The first credit counseling
service was started by the credit card industry, who wanted a way to
limit the amount they had to write off each year as uncollectible debt
and keep debtors paying for a longer period of time without filing bankruptcy.
This is why some consumer groups argue that credit counseling services
are nothing more than nice collection agencies working for the credit
card industry.
Most credit counseling services register with the IRS as non-profits,
which gives them considerable tax benefits. Unfortunately, the public
seems to equate non-profit with charity, which isn't at all true. Therefore,
don't let the fact that a credit counseling service is a non-profit mislead
you into thinking that it is a charitable organization looking after
your best interest. Even though reputable credit counseling services
provide good credit counseling and debt management advice to their clients,
all of them, without exception, are working for the creditors and the
banking industry from whom they derive almost all of their profits (the
credit counseling service keeps a portion of the amount they collect
from their clients).
For this type of program, clients make a monthly payment directly to the counseling agency. The agency uses this money to pay the creditors at lower interest rates. With this option you will need to pay each credit balance in full, but at lower interest rates than with your original contract. Unlike debt settlement, credit counselors do not negotiate a reduced debt amount with your creditors. Credit Counseling has numerous drawbacks.
Clients don't have much control over their own money as the client
pays money directly to the agency, and the agency then pays the creditors.
Many of these programs market themselves as non-profit
agencies that are purely interested in representing
the person in debt. Although
they are non-profit, they do charge certain fees, because the agency itself
needs to earn money.
Credit Counseling may take up to 9 years to complete,
depending on the amount of debt. |
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Another popular form of debt management is called debt consolidation. With debt consolidation, you consolidate together several of your small, high-interest debts into one large loan, with a single monthly payment at a lower interest rate. The idea is that you will pay less over time, since the interest rate is lower. You will also go from dealing with multiple debt accounts to handling one debt account. Here's the problem: you must find a lender willing to agree to lend you money, especially if your credit score has already been affected. Obtaining such a loan can be difficult, so most people end up borrowing money against secured debt, such as their home. However, if you are unable to make your mortgage payments, your house could be at risk. Borrowing money to pay off debt is dangerous, especially for people who have trouble in this area. We can direct you to the best debt consolidation agencies if that type of program suits you best. |
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Doing It Yourself
If you continue to pay the minimum balance on your credit
card bills you may be faced with paying thousands of dollars
in interest alone, plus it could take you years to pay off the
principal. Just take a look at these examples;
- If you owe $15,000 on a credit card with
an interest rate of 19%…it could take you 28
YEARS and at least $22,500 in interest
payments alone to pay off the debt making the minimum monthly
payments.
- If you owe $35,000 with an interest
rate of 24% it would take 36 years to pay
off the balance if you just made the minimum monthly payment
at a cost of more than $103,000.
Negotiating with creditors yourself is also
possible. But haggling with creditors can be difficult for
some people in debt. Creditors have highly skilled negotiators
working on their side, waiting to take advantage of any irrational
misstep you might have. They don't want to lose any of their
money. Our professional debt settlement staff knows how to
sidestep their strategies. We have established relationships
with many credit card companies to provide credit card debt
help for our clients. The only way to properly determine which
type of program will benefit you most is for one of our highly
trained professional counselors to go over your specific situation
together.
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