Qualifying Your Debt CompanyFrequently Asked Questions
1. Why should I use America Debt Resolutions to settle my debt instead of doing it myself?
You can negotiate your debts with your creditors on your own, just as you can also build your own custom home along with that infinity pool. It just happens that most of us leave the big jobs to the experts. The settlement process is usually very emotional and stressful, especially when you are the one called by the collectors while also receiving daily collection letters. Most people leave these daunting tasks to experienced arbitrators who maintain relationships with numerous consumer-lending institutions and collection agencies that negotiate with them on a daily basis. Our arbitrators have extensive knowledge of federal and state consumer laws and exercise the Fair Credit Reporting Act, Fair Credit Billing Act, as well as the Fair Debt Collection Practices Act to help settle your debt. America Debt Resolutions enrollment specialists are experienced in qualifying clients to get out of debt quickly and with a customized game plan to save money in the process. To recap the answer …Leave it to the experts.
2. Do I have to be behind on my debts to qualify for your debt negotiation program?
No. A consumer does not need to behind on payments in order to put game plan together. The majority of people realize that they are experiencing a legitimate financial hardship before their situation has deteriorated to the point where they have become delinquent on their accounts or foresee delinquency. Our program works with debtors in all stages of payments and collection, although we find that once you are behind, creditors tend to be more willing to negotiate better settlements in some situations.
3. How does the program work?
The first step in our program is to obtain a free debt consultation from one of our enrollment specialists. Fill out a request form or call us at 1-877-350-3328 (DEBT) option 1. Our enrollment specialists will assess your situation and determine whether you are a good candidate for our program. Upon acceptance, your enrollment specialist will help collect and gather the information and documentation needed to assist you. After a complete analysis, your enrollment specialist will help you establish an affordable monthly payment which is placed into a special purpose account. The savings account is used for future debt settlement purposes. America Debt Resolutions will negotiate an acceptable written settlement offer and you will receive written confirmation documenting that your debt is paid.
4. How does this affect my credit?
If you are current on your payments, it is very difficult, if not impossible to settle your debt. Therefore, you will have to voluntarily stop paying your unsecured debts and allow them go into delinquency. By not paying your creditors, your credit will be affected by debt settlement. With any debt relief program, there will be a temporary negative effect on your credit rating. However, following the successful completion of the program, all accounts will be settled and creditors will report the accounts as “settled” or “paid in full” to the credit reporting agencies. Having to experience this temporary setback on credit may be better than having to file for bankruptcy, especially on your credit rating. During your debt settlement program, your total balances are being lowered over time as they are settled in full – a wonderful start to recovery! There are many factors that make up your credit rating. Your credit score is sliced up like a pizza pie. Making on-time payments is just one slice. If you have ever been late on a minimum payment, then you have already affected the whole pizza. As a wise man once quoted “Extra money puts food on the dinner table, not the elusive perfect credit score of 850.”
5. Is debt settlement like debt consolidation?
No. The debt settlement process involves negotiating with your creditors to settle your debt for amounts considerably less than what you currently owe.
Debt consolidation can be completed one of two ways:
- The first method is through a debt consolidation loan. A debt consolidation loan converts unsecured debt into secured debt via a home mortgage, which usually takes the form of a home equity loan. (If you do not have enough equity, bad credit, or too much debt, you are not likely to receive approval for a debt consolidation loan). In summary, if a lender has a house as collateral (and is not paid), there can be a mortgage foreclosure and one’s home can be taken away. In a consolidation loan, a consumer is paying a good deal of money in closing costs, fees and interest for the privilege of putting his/her most value asset at risk-usually the right method. Debt consolidation may also take the form of unsecured loans or transferring credit card balances to a new provider. With debt consolidation loans, you basically move the debt from one creditor to another.
- The second method is going through a debt consolidation service, also referred to as debt consolidation counselors, which claim to provide help and direction for people with debt and credit problems. They call themselves non-profit debt consolidation companies, but this can be misleading. The bottom line is that these “non-profit” debt consolidation companies are funded by the credit card companies who they are hypothetically “negotiating” with to help you. They claim that they will work with your creditors to provide you lower interest rates and payments. However, you pay a fee to have these services monthly and it is to their best interest to keep you in the program as long as they can and pay back almost every dime you owe.
Therefore, the goal of debt settlement is to negotiate agreed payoff amounts with your creditors. This will save you sizable amounts of money on debt principal and interest. It also provides you with the opportunity to pay-off your debts faster.
6. How long does debt settlement take?
This really depends on your total debt balance and the length of time it takes for you to build up the necessary funds to settle. Every situation is different and the amount of time it takes to clear your debts is largely dependent on your current financial situation. We have many clients who are able to make more than the minimum program payment to finish sooner. For example, tax refunds are frequently applied to the program. If you’re serious about getting out of debt, you will focus on putting as much money as possible towards your program. Our intent is to get you out of debt as quickly as possible, but we also understand that you have other financial requirements. We will customize a program that meets your budget constraints and your financial goals. One of our enrollment specialist/credit analysts can give you a free, confidential consultation about your specific situation.
7. What if I am sued and the creditor gets a judgment?
A creditor is well within their rights to have your debt taken over by third party collection agencies and/or law firms. What most people do not realize is that winning the judgment is only half the battle to the creditor. The hard part is collecting the money. You see, even when a judgment get awarded, it is still up to the plaintiff to recover his money. The court does not require the debtor to pay, and will not even help collect. The result is that millions of judgments are just sitting in files. “Nine of 10 winners of a judgment never see a dime.” We negotiate all unsecured debts, which includes judgments. Regardless of what stage of collections a debt is in, it can negotiate. If you get sued, a lawsuit is to force a settlement on the matter. In our experience, most creditors would rather not go to the expense of suing and simply try to negotiate a settlement. In your enrollment process, we go over these types of scenarios which we have an optional program in place to combat this from occurring. Just remember, we’re not a law firm and can’t offer any legal advice.
8. What is the difference between unsecured and secured debt?
A secured debt is a debt in which the creditor maintains a security interest in an item or piece of personal property such as home mortgage, vehicle loan and just about all finance company loans are secured debts. If you fall behind on payments, the lender can repossess the property that originally secured the debt. The creditor can institute a foreclosure or repossession to take the property identified by the lien, called the collateral, to satisfy the debt if you default. An added drawback to secured debt is the fact that you may remain accountable for the remaining balance owed on the debt after your property gets repossessed then sold. Unsecured debt is not tied to any item of property. A creditor does not have the right to grab property to satisfy the debt if you default. If you fall behind on an unsecured debt, lenders can take legal action against you, but more commonly will try to work out a reasonable debt settlement. Unsecured debt is any loan or debt that has no tangible assets or property attached to it. Examples of unsecured debt include:
- credit cards
- department store cards
- legal bills
- unsecured personal loans
- health club memberships
- magazine/record clubs fees
- cellular telephone bills
- signature loans
- collection agencies
- *home equity line of credit (HELOC) *
- credit lines
*/House not in possession)
9. Why should I not just file bankruptcy?
Bankruptcy will eliminate your debt, however, in the end the price is high. Bankruptcy will stay on your credit report as a major infraction for 7-10 years. In addition, most credit applications, especially mortgage applications ask, have you EVER filed bankruptcy. Most importantly, you can be denied virtually any type of credit with a bankruptcy on your report. In addition, since the bankruptcy laws have changed recently, it is even more difficult to qualify for Chapter 7, the method of liquidating assets to eliminate your debt. Therefore, you are obligated to notify them of the bankruptcy even if it is off your credit report. Bankruptcy is also part of your public record. Any background check for employment or other purposes will uncover that you have filed for bankruptcy. This could affect your ability to find a job, especially in financial services. It may be inevitable in certain situations to file for bankruptcy. Call us for a consultation to learn about alternative options to help you.
10. Will I owe money to the IRS for my reduced settlement?
Creditors may report canceled debts exceeding $600 to the IRS, and you are supposed to report the same as income on your annual tax return. However, the IRS permits you to write off any “income” from canceled debts up to the amount by which you were “insolvent” at the time. Therefore, unless you have a positive net worth, then you ordinarily will not be obligated to pay taxes on the forgiven amounts. Additionally, if you do not qualify as insolvent, non-principal amounts such as fees accumulated on the account may be deducted from the amount reported. Refer to www.IRS.gov.
11. What happens if I miss a monthly payment to my program savings? Will my program be deactivated?
No. Sometimes even with the best of plans you can’t account for emergencies. That’s no reason to be dropped from the program. One call to your arbitrator and we’ll find a way to get you back on track. If you know in advance that there’s going to be a problem with a payment, give us 5 business days advanced notice and we can work out other arrangements. Keep in mind that we rely on you to make your monthly payments so that we know you are accruing adequate funds to settle your accounts that we are negotiating on your behalf. If you miss a payment, your debt relief program will be delayed and you could miss possible settlements.
12. Do I have access to my savings account where settlements are being made from?
Yes. The dedicated trust account is set up in your name to hold your money. The idea behind setting up this new account is to keep a healthy distance from your current bank accounts. Believe it or not, separating your account can actually increase your chances of successfully completing the program on time and gives all parties full transparency.
13. Do I have to include all of my credit cards into the program for settlement?
Yes. We highly recommend that you enroll all unsecured credit cards into your debt settlement program. The use of any credit card while enrolled could have damaging results to the settlement process. Any accounts that are included in the settlement will have to be closed immediately. Creditors won’t settle accounts that are still open. You should use a debit card for all emergencies.
14. Will America Debt Resolutions stop late fees and interest from accruing on my accounts?
No. America Debt Resolutions cannot stop a creditor from accruing interest or late fees on an accounts. However, because we negotiate all debts based on what you owe, your savings will far exceed any interest or late fees that could accrue on the account.
15. When does America Debt Resolutions begin settling my debt?
Once enrolled in our debt settlement program, your creditors are notified when it is in your best interest. However, we can only settle a debt once the settlement funds are available in your F.D.I.C. insured special purpose savings account. The negotiation process takes time, but you can rest assured that our negotiators will settle your accounts when the time is right to maximize your savings.
16. Who is AFCC?
AFCC (The American Fair Credit Council) is the leading association of professional Consumer Credit Advocates. The AFCC ensures consumers struggling with overwhelming credit and debt problems are treated fairly by debt relief organizations. AFCC members are held to the strictest Code of Conduct in the industry. See our AFCC membership information here: http://www.americanfaircreditcouncil.org/blog/member/america-debt-resolutions/.
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Note: This should not be considered legal advice. America Debt Resolutions, LLC does not provide tax, legal or financial counsel. We recommend if you need any type of legal or tax related advice, contact a licensed attorney or a qualified accountant.