Frequently Asked Questions
Listed below are the most frequently asked questions that we receive. If your question is not answered, please contact us for further information.
DEBT SETTLEMENT
- How does Debt Settlement Work?
- How Quickly can I become debt free using Debt Settlement?
- What are the downsides to a Debt Settlement program?
- Why would banks agree to take 40-50 Cents on the dollar?
- How does Debt Settlement affect my credit?
DEBT MANAGEMENT
- What is unsecured debt?
- How does a Debt Management Plan differ from declaring bankruptcy?
- What is a Debt Management Plan?
- If I join a Debt Management Plan, how will it affect my credit?
- How long will it take to pay off my debts?
- Should I get a loan instead?
- Do I have to put all of my credit cards into this program?
- Is the information I give my specialist confidential?
- Will I still receive harassing phone calls?
DEBT SETTLEMENT
How exactly does Debt Settlement work?
First, we contract with one of our approved affiliate companies to settle your debt.
They will set up a program that has you making payments to a trust account, in your name. You own it, and have complete control of it.
These payments will generally be at either the same amount you are paying to the credit card companies, or at a slightly lower amount. The fees for the credit settlement and negotiations are included in this monthly payment.
Once there is enough money in the trust account to start negotiating on your first credit card or debt, a skilled debt arbitrator will contact the creditor and begin the process. Typically, they will offer 10 to 20 cents on the dollar as a starting point. Generally, the banks will come back with a counter offer. The settlement company will contact you and ask for authorization to release the funds from your trust account to settle the debt, only if it is acceptable to you.
Over-all, regardless of some companies outrageous claims, the industry average is about 50 cents on the dollar as the amount they can settle your credit card and other unsecured debt. This is because some banks may settle at 20 cents, others may settle at 50 cents on the dollar. So, it is best to use the industry average of 50 cents on the dollar, although our average settlement is less.
How Quickly can I become Debt Free?
This process depends on how quickly you fund your trust account. The more you commit to the account, the quicker you can be completely out of debt.
What are the down sides of this type of program? You will get calls and letters from the credit companies. They may threaten lawsuits etc. Here is the reality. These companies will do everything they can think of to threaten you, intimidate you, and coerce you into continuing their outrageous payments. Debt settlement companies will supply you with cease and desist letters (as outlined under the Federal Debt Collection Practices Act) that will eliminate much of the calls. After the creditors are informed that you are enrolled, their communications will be with your assigned attorney or negotiator, not you. There are no guarantees, but most companies will negotiate after a period of time.
Why would banks agree to take 50 cents or less on the dollar?
You have to understand how the system works. Generally, banks will keep the collection attempts on their credit cards with an "in house" collection team until the debt is about 6 months old. Typically, if the debt has not been collected, it will be assigned to a collection agency. The collections agency will make attempts to settle the debt in the next 2 to 6 months. If the debt has not been collected, the bank bundles up all of the credit cards that have not been collected and sells it as an investment to a collection company. Collection companies pay anywhere from 20 cents on the dollar to as little as 1% on the dollar (depending on the age and number of times the debt has been sold). Somewhere in this process one of these collection companies will accept a reasonable settlement offer. Debt becomes less valuable with age. As a "rule of thumb" once debt is 6 months old, it devalues at the rate of 10 percent per month until it is virtually worthless.
How does this affect my credit?
The initial time period of the debt settlement plan will show a series of late payments (assuming you have decided to not make payments to the Credit Card companies). This will adversely affect your credit until the debt is settled. Once the debt is settled, the credit card companies will report the debt as "paid as agreed", "paid in full", or "settled for less than the full amount". When this occurs, your credit report will be positively affected. Remember, payment history is only one part of your credit. Lowering the amount of debt you have outstanding, and increasing your available credit will be a positive impact towards your credit score. After our program completion, our credit restoration department works toward further enhancing your credit.
DEBT MANAGEMENT
What is unsecured debt?
Unsecured debt is when a creditor holds no collateral. Examples of unsecured debt are Credit Cards, Unsecured Personal Loans, Medical Bills, Student Loans, Taxes, Charged-Off Accounts, and Collection Agencies - no form of collateral such as a home or car was utilized to secure the "loan" for services rendered or goods received. Secured loans such as a Mortgage or car Loans cannot be included in a debt management program.
How does a Debt Management Plan differ from declaring bankruptcy?
Debt Management is a voluntary process to help people in debt regain control of their finances, regardless of whether they have good credit or bad credit. The Debt Management Plan provided by Success Debt Relief is a viable option to trying to declare bankruptcy. Our affiliate relationships will bundle tens of thousands of accounts to the same creditor together and get interest rates lowered.
In contrast, when you file for Chapter 13 bankruptcy, it becomes public record. Such a step has serious and long-term effects, which may negatively hurt your credit for decades and may make it difficult for you to obtain credit in the future or obtain certain types of employment.
What is a Debt Management Plan?
A program designed to assist consumers in paying off outstanding debt in a relatively short period of time, at much lower rates than they're currently paying.
If I join a Debt Management Plan, how will it affect my credit?
If you are delinquent on your accounts now, we can get your creditors to re-age your accounts and show them current. If you pay your bills on time, but have too much outstanding debt, you are not getting ahead by making minimum payments. In fact, it takes about 25+ years to eliminate your credit card debt by only making the minimum payment.
How long will it take to pay off my debts?
Debt repayment can vary from client to client; it depends on the total amount of debt that you have and the terms being offered by your specific creditors, however, our clients are generally able to pay back their debt in 2 to 3 years.
Should I get a loan instead?
NO. Our specialists explain that loans are what got you into trouble in the first place. Why? Most unsecured loans have high interest, and if you get a home equity loan, you are now securing your credit cards with your home.
Do I have to put all of my credit cards into this program?
NO. It is your decision as to what debt you want to include in our program. In fact, many people choose to keep at least one credit card open. You can always add on additional credit cards later.
Is the information I give my specialist confidential?
All information you give Success Debt Relief is strictly confidential. We are required to conform to all state and federal laws.
What exactly is debt settlement I debt negotiation?
"Debt negotiation" and "debt settlement" are terms that refer to debt relief. A debt settlement Is when your creditor agrees to accept less than you owe to satisfy your debt. This process requires negotiations between the consumer and their creditors to settle unsecured debt for less than the full balance. A professional debt settlement company often conducts these negotiations on behalf of the consumer.
Please understand that debt settlement companies DO NOT make monthly payments to your creditors; they offer your creditors lump sum settlements once you've set-aside enough funds for a settlement. Most debt settlement customers seek help because they cannot afford a debt management (credit counseling) plan and are desperately seeking to avoid bankruptcy. Debt settlement Is typically for two types of consumers: 1) those who are already behind on their payments or 2) those who are' about to fall behind.
How does debt settlement differ from credit counseling?
Consumer credit counseling agencies are organizations that provide counseling services to help you budget and organize your finances so you can pay back your debt. Consumer credit counseling agencies typically offer debt management plans that lower your Interest rate so you can pay back your creditors. While some agencies may do a good job orchestrating a repayment plan, many of them are funded by the very creditors you are trying to settle with. A debt settlement company Is funded entirely through the fees It collects from clients, so they work entirely for you, not your creditors.
Consumer Credit Counseling Is an alternative for consumers experiencing financial difficulties and unable to make their minimum payments. Consumer Credit Counseling organlzatlon~ typically attempt to reduced Interest rate and fees on your debts, not the balances themselves. Through the reduction of fees and Interest, Credit Counseling will generally allow you to get out of debt In about five years. However, you will end up paying back 100% of your balance plus Interest, which will require a significantly higher monthly obligation than a typical debt negotiation program. While some agencies may do a good job orchestrating a repayment plan, many of them are funded by the very creditors you are trying to settle with. A debt settlement company Is funded entirely through the fees It collects from clients, so they work entirely for you, not your creditors.
Consumer Credit Counseling organizations are right for some people, especially those who can afford the higher monthly obligation that Is required In such a program.
Is your service the same as debt consolidation?
No. Debt consolidation means that a person takes out a loan to payoff their existing debts, thus consolidating their existing debts Into one "new" debt. The goal of debt consolidation Is to use a lower Interest loan to payoff higher Interest debt. Debt consolidation does not result In any debt relief or debt forgiveness. However, In the long run debt consolidation may save a person some money with respect to the Interest paid on the outstanding debt balance. However, the full balance plus interest will be paid.
How much money can I save by using Debt Settlement?
Each debt settlement customer Is completely and totally unique and results will vary. Certain factors may include who your creditors are and your specific economic Circumstances.
How does the Debt Settlement process work?
Together, we will work out a monthly amount that you can afford. That amount is electronically debited from your personal bank account and deposited into their "settlement account" at a federally insured bank on the date(s) you work out with them.
When you have accumulated enough money to cover a potential settlement contacts the targeted creditors and makes them an offer using our years of experience In the debt settlement Industry. Offers are negotiated until both you and your creditor agree on the amount. Once this settlement is paid, you will begin the accumulation of funds In your settlement account and the process will repeat as money becomes available for the next settlement. We continue In this way until all of the accounts are settled.
How quickly can I be out of debt?
The amount of time It takes to get out of debt Is dependent on your particular situation. Our Individualized debt settlement program usually is projected to take less time than many other debt relief options, such and consumer credit counseling programs or by taking out a debt consolidation loan. The time It takes to complete a debt settlement program depends on many factors, Including how much debt you have, who your creditors are, as well as your ability to save and set aside funds for settlements.
Why would my creditors agree to accept less than the amount I owe them?
Your creditors always 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 settlement, especially once they recognize the financial hardships you are facing.
Should I consider bankruptcy?
For some people, bankruptcy is the best option. However, you should consider and explore all other avenues of debt relief before filing bankruptcy. If you want to explore bankruptcy as an option, you should speak with a bankruptcy attorney. New Beginnings is not a law firm and cannot provide legal advice.
Who qualifies for your individualized debt settlement program?
Not everyone qualifies for the New Beginnings debt settlement program. Debt settlement is best described as an alternative to bankruptcy for people with overwhelming debt who have endured personal or financial hardships that prevent them from fully repaying their creditors. Each individual circumstance is different.
Who doesn`t qualify for debt settlement?
Typically, people who do not qualify for debt settlement either have the wrong type of debt (secured) or cannot afford the debt settlement program. If you do not qualify for debt settlement, 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 debt settlement?
Only unsecured debts qualify for a debt settlement program. Unsecured debt is debt that is not "secured" by collateral, such as a home or car. Credit card debt is the most common type of unsecured debt, however Medical Bills, Personal Loans, Store Cards, and Unsecured Bank Loans are other examples of types of debt that may qualify. The amount of debt you owe may also play a significant factor in qualifying for debt settlement. If you have a large amount of debt (usually $10,000 or more) of unsecured debt (such as credit card debt), are experiencing a financial hardship and want to avoid bankruptcy, then you might qualify for a debt settlement program.
What types of debts do not qualify for debt settlement?
Debt settlement companies do not settle “secured” debt. This is debt that is backed by assets such as a house or a car. This is because creditors can repossess the asset instead of negotiating a settlement. Examples of secured debt are Student Loans, Taxes, Car Loans, Mortgage Loans, and Insurance Policies.
Can`t I negotiate a settlement on my own?
You can certainly attempt to negotiate a debt settlement on your own. Our trained negotiators have years of combined experience negotiating and securing settlements with creditors and debt collectors. To successfully settle debt on your own you need to understand the collections process, differences between various creditors, and the right time to begin negotiations. You must also understand how a debt settlement agreement is structured to make sure the agreement clearly spells out the negotiated settlement. Debt settlement is a complicated process and if you`re not sure you have the knowledge, organization and self discipline, you may want to involve an experienced professional organization such as New Beginnings.
How does a debt settlement program effect my credit?
The short and direct answer is that your credit score will probably get worse before it gets better. That’s the trade-off for being granted substantial debt relief without filing bankruptcy. Delinquencies and charge-offs may be reported to the credit reporting agencies and remain on your credit report for up to 7 years. Settlements may be reported as “settled for less than full amount,” or something similar, on your credit report. However, if you qualify for debt settlement, chances are your credit may already be damaged due to late payments or other symptoms of your financial hardship. By enrolling onto a debt settlement program, you are indicating your desire to settle your enrolled debt once and for all rather than maintaining a good credit score, which serves to allow you to accumulate more debt.
Our primary goal is to help our customers get out of debt as quickly as possible. Credit, while a very important thing to have and maintain, is of secondary importance to getting your debt under control and becoming financially solvent.
After a client completes the program, our credit restoration department can "clean" the credit report as well as take the neccessary steps to raise the scores.
What if I need to cancel the program?
You can leave our debt settlement program at any time with no further obligation to Success Debt Relief. All the funds you have accumulated in your settlement account are yours and you will have full control of these funds 100% of the time in our program.
What if a creditor says they will not work with Success Debt Relief?
If your creditor tells you they do not work with Success Debt Relief or any debt settlement company, it is typically just a scare tactic to try and get you to pay them money. Trustworthy debt settlement companies only enroll clients whose accounts qualify for settlement.
FDCPA - The Fair Debt Collection Practices Act
The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you.Under the FDCPA, a debt collector is someone who regularly collects debts owed to others. This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and then try to collect them.
Here are some questions and answers about your rights under the Act.
What types of debts are covered?
The Act covers personal, family, and household debts, including money you owe on a personal credit card account, an auto loan, a medical bill, and your mortgage. The FDCPA doesn’t cover debts you incurred to run a business.
Can a debt collector contact me any time or any place?
No. A debt collector may not contact you at inconvenient times or places, such as before 8 in the morning or after 9 at night, unless you agree to it. And collectors may not contact you at work if they’re told (orally or in writing) that you’re not allowed to get calls there.
How can I stop a debt collector from contacting me?
If a collector contacts you about a debt, you may want to talk to them at least once to see if you can resolve the matter – even if you don’t think you owe the debt, can’t repay it immediately, or think that the collector is contacting you by mistake. If you decide after contacting the debt collector that you don’t want the collector to contact you again, tell the collector – in writing – to stop contacting you. Here’s how to do that:
Make a copy of your letter. Send the original by certified mail, and pay for a “return receipt” so you’ll be able to document what the collector received. Once the collector receives your letter, they may not contact you again, with two exceptions: a collector can contact you to tell you there will be no further contact or to let you know that they or the creditor intend to take a specific action, like filing a lawsuit. Sending such a letter to a debt collector you owe money to does not get rid of the debt, but it should stop the contact. The creditor or the debt collector still can sue you to collect the debt.
Can a debt collector contact anyone else about my debt?
If an attorney is representing you about the debt, the debt collector must contact the attorney, rather than you. If you don’t have an attorney, a collector may contact other people – but only to find out your address, your home phone number, and where you work. Collectors usually are prohibited from contacting third parties more than once. Other than to obtain this location information about you, a debt collector generally is not permitted to discuss your debt with anyone other than you, your spouse, or your attorney.
What does the debt collector have to tell me about the debt?
Every collector must send you a written “validation notice” telling you how much money you owe within five days after they first contact you. This notice also must include the name of the creditor to whom you owe the money, and how to proceed if you don’t think you owe the money.
Can a debt collector keep contacting me if I don’t think I owe any money?
If you send the debt collector a letter stating that you don’t owe any or all of the money, or asking for verification of the debt, that collector must stop contacting you. You have to send that letter within 30 days after you receive the validation notice. But a collector can begin contacting you again if it sends you written verification of the debt, like a copy of a bill for the amount you owe.
What practices are off limits for debt collectors?
Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact. For example, they may not:
- Use threats of violence or harm;
- Publish a list of names of people who refuse to pay their debts (but they can give this information to the credit reporting companies);
- Use obscene or profane language; or
- Repeatedly use the phone to annoy someone.
False statements. Debt collectors may not lie when they are trying to collect a debt. For example, they may not:
- Falsely claim that they are attorneys or government representatives;
- Falsely claim that you have committed a crime;
- Falsely represent that they operate or work for a credit reporting company;
- Misrepresent the amount you owe;
- Indicate that papers they send you are legal forms if they aren’t; or
- Indicate that papers they send to you aren’t legal forms if they are.
Debt collectors also are prohibited from saying that:
- You will be arrested if you don’t pay your debt;
- They’ll seize, garnish, attach, or sell your property or wages unless they are permitted by law to take the action and intend to do so; or
- Legal action will be taken against you, if doing so would be illegal or if they don’t intend to take the action.
Debt collectors may not:
- Give false credit information about you to anyone, including a credit reporting company;
- Send you anything that looks like an official document from a court or government agency if it isn’t; or
- Use a false company name.
Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt. For example, they may not:
- Try to collect any interest, fee, or other charge on top of the amount you owe unless the contract that created your debt – or your state law – allows the charge;
- Deposit a post-dated check early;
- Take or threaten to take your property unless it can be done legally; or
- Contact you by postcard. Can I control which debts my payments apply to?
Yes. If a debt collector is trying to collect more than one debt from you, the collector must apply any payment you make to the debt you select. Equally important, a debt collector may not apply a payment to a debt you don’t think you owe.
Do I have any recourse if I think a debt collector has violated the law?
You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, the judge can require the collector to pay you for any damages you can prove you suffered because of the illegal collection practices, like lost wages and medical bills. The judge can require the debt collector to pay you up to $1,000, even if you can’t prove that you suffered actual damages. You also can be reimbursed for your attorney’s fees and court costs. A group of people also may sue a debt collector as part of a class action lawsuit and recover money for damages up to $500,000, or one percent of the collector’s net worth, whichever amount is lower. Even if a debt collector violates the FDCPA in trying to collect a debt, the debt does not go away if you owe it.
What should I do if a debt collector sues me?
If a debt collector files a lawsuit against you to collect a debt, respond to the lawsuit, either personally or through your lawyer, by the date specified in the court papers to preserve your rights.
Where do I report a debt collector for an alleged violation?
Report any problems you have with a debt collector to your state Attorney General’s office (www.naag.org) and the Federal Trade Commission (www.ftc.gov). Many states have their own debt collection laws that are different from the federal Fair Debt Collection Practices Act. Your Attorney General’s office can help you determine your rights under your state’s law.
The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
