Debt resolution (aka debt settlement, negotiated debt settlement, or debt negotiation) is a process where a company negotiates or settles unsecured debts to a creditor or debt collector.
The debt resolution company has two goals when they’re negotiating with your creditors:
While that may seem too good to be true, the debt resolution process is pretty standard for creditors... many often settle debt for less than the amount owed. Creditors know that clients facing hardship may never pay the debt or decide to declare bankruptcy, so it’s in the creditor’s own interest to settle the debt for less rather than getting no money at all.
Your Account Executive can walk you through each step in detail, but here’s an overview of our process.
*NOTE: Your negotiator will also collect a fee from your Dedicated Savings Account, but only once:
While it varies from person to person, the average debt resolution program lasts two to four years. How long your program takes depends on a few factors, including how much money you deposit in your account every month. You can start paying off debts when you’ve saved enough money to cover the amount negotiated in the settlement. The more money you can add to your Dedicated Savings Account, the quicker your debts can be settled.
Keep in mind: Missing payments towards your debt resolution program can stall your negotiation process as there won’t be enough funds in your Dedicated Savings Account for negotiation.
Most of your creditors won’t get into serious debt reduction discussions with your negotiators until they know you’re serious about paying them off. You can only prove that commitment to paying them off by building up enough money in your Dedicated Savings Account.
In general, the first settlement tends to happen within the first four to six months of the program.
The answer is simple: you are! Once you’ve enrolled in a program, you’ll set up your Dedicated Savings Account in your name and deposit your money into it. The reason for setting up this new account (rather than just putting your monthly deposits into an existing bank account) is to keep those settlement funds separate from your other money. Of course, if you ever withdraw from the program, the remaining funds in your Dedicated Savings Account (minus banking and earned settlement fees) are –as always– yours.
No! We know that even the most organized, punctual person on the planet will sometimes face unforeseen issues. It could happen to anyone, so it’s not a reason to drop you from the program.
If something comes up out of the blue, give customer service a call and we can find a way to get you back on track. If you know ahead of time that you’ll have a problem with a payment, tell us at least five business days ahead of time so we can make other arrangements.
Keep in mind: building up the amount of money in your Dedicated Savings Account is an important part of settling your debts, so missing a payment may delay your debt relief program progress (plus, you could miss possible settlements.)
Part of your agreement with your credit card companies allows them to continue to add interest and late fees to your debt any time you fail to make payments. This means while you’re getting your Dedicated Savings Account set up and funded, your credit card debt could go up. However, the goal of the debt resolution program is to arrange settlements that reduce your debt balances no matter what kind of interest charges or late fees were added when you began our program.
In extreme cases when a creditor refuses to settle, the only option may be to remove the creditor from the program. If a settlement can’t be reached, your fees will be adjusted.
Creditors hire collectors to pressure you into paying as much as they can get, and they’ll then pocket a percentage of whatever you pay your creditors. Collection calls are a natural part of debt resolution programs, and are actually a key indicator that your debt resolution program is working! Our most successful clients choose to let calls from unrecognized numbers go to voicemail. There are even free apps you can download on a smartphone to block certain calls.
Thanks to federal and state laws, you have rights against collection harassment. If you accidentally end up speaking to a collector, you should let the collector know you’re working with negotiators, so they should call them instead of you. Then, make sure to let your negotiator know about the call, including which collector is calling you and when they called. Your creditors should call your negotiators if they’re looking to receive payment, not you.
Legal action by creditors could occur. If you do receive a legal notice, please send it to our service team so they can prioritize this creditor or lender and work to settle it first.
Rather than taking legal action, a more common step creditors take is selling your debt to third-party collection agencies and/or law firms. When something like this happens, this particular creditor or lender might get moved to a priority list.
If a lawsuit does get filed against you, the settlement negotiators can attempt to resolve that creditor or lender’s account by setting up a specific payment plan. They also may be able to refer you for further help if needed.
Note: We are not a law firm and can’t offer any legal advice.
While the answer can be different for everyone, in general, forgiven debts can be taxable. When tax time rolls around, you’ll likely receive a Cancellation of Debt form (1099-c) from the lender that forgave your debt.
To find out about your specific situation –and understand the potential tax implications of any debt that’s been forgiven through a debt relief program– it’s a good idea to talk to your tax advisor.
Most client credit is already being negatively impacted by poor payment history and amounts owed, which are the two largest factors that make up a credit score. Whether your credit is maxed out or you have a high debt-to-credit or debt-to-income ratio, chances are that your score is on the low end.
Our goal is to help you resolve your debt quickly, so that you can start building a brighter financial future (including a more positive credit score) as soon as possible. Everyone’s specific credit situation is different, but in general, enrolling in any debt resolution program could impact your credit score. In the short term, the impact could be negative. Higher credit scores tend to fall further than lower credit scores, which can seem like a terrifying prospect at first, especially for those who aren’t prepared for a drop in their score.
The good news is that, while you may take one step back with your credit score, you’ll take five steps forward with resolving debt. In the long term, the credit effect could be much more positive; once your debts are resolved, you can practice positive credit behavior to build your credit score back up over time.