How does debt settlement and negotiation work?
Debt Settlement is what happens when you reduce the amount of your unsecured personal debts through creditor negotiations. Debt Settlement is proven to be much more effective than merely reducing interest rates, as is the norm with Debt Consolidation and Credit Counseling (CCCS). If you reduce the actual debt balance, Debt Settlement provides a much faster means of becoming debt-free.
How long does the debt settlement process take?
It will vary. Sometimes, debt settlements are reached and documented in as little as a few days. It will depend on how behind in payments you are, the creditor, what kind of money you have set aside to fund any settlements and what your financial goals are.
Will debt settlement affect my credit score (FICO)?
Yes. More often than not, being in debt, your credit accounts already have, or are, in the process of being reported negatively to the major credit reporting agencies. Depending on how long you have been delinquent in payments, negotiating and settling these debts for good will have an overall positive effect on your credit score. Settled accounts and or zero balances are seen as "positive" when compared to unresolved debts or a bankruptcy. This is even more important when you are attempting to purchase or refinance a home. If you have charge offs or collection accounts being reported, it is best to approach settlements prior to applying for a loan.
Also, there are times that settling a long over due account can have a net negative effect on your credit. When it comes to properly addressing your debt load while keeping an eye on your future credit goals and needs, working with San Diego Debt Relief could mean the difference of thousands of dollars needlessly wasted as well as additional years separating you from achieving your goals.
Can I really negotiate my debt with my creditors myself?
Yes, but it is not recommended. To get the best results you want to have representation that knows the system and how creditors work. This time it will take you to get up to speed on the process could cost you thousands of dollars. Here at San Diego Debt Relief our Attorneys not only are experts in Debt Negotiation, but also handle bankruptcy which goes a long way in getting the creditors to become flexible.
What does debt settlement and negotiation cost?
Some Debt Settlement Companies charge several thousands of dollars to settle your debts for you (usually 15-20% of the total debt). San Diego Debt Relief charges a flat fee. At your free consultation we will be able to determine how much work will be involved to settle your debt, once we have that we will quote you the flat fee. Our clients really like this because they know the entire cost before even hiring the Firm.
Is my personal information kept private?
Yes, absolutely. In a case where we are negotiating settlements for you, however, you will be required to provide San Diego Debt Relief with written, and sometimes verbal, authorization that allows us to give and receive information on your behalf when negotiating credit accounts with each individual creditor, as requested by you, the client.
Will creditors or debt collectors still be contacting me about my debt(s)?
Creditor calls are simply part of the process. The good news is that after you put San Diego Debt Relief in place we send out letters to all creditors to contact us directly.
Is it true that there are sometimes tax consequences to settling a debt for less than the original balance?
Yes. If you have a debt that is settled for less than the original balance, and the difference (the forgiven portion of the debt) is greater than $600.00, the creditor is supposed to send you a 1099c, which would then be reported as income.
The IRS does allow you to write off any income from forgiven debts up to the amount by which you were insolvent at that time. Unless you had a positive net worth at the time that you settled an account, which, for the most part, is unlikely if you're buried in debt, then you generally wouldn't have to pay any taxes on the forgiven debt(s). Always consult a tax attorney or advisor for options that can be applied to your specific circumstances. Incidentally, if you do wind up owing taxes, it is because you saved money. So, keep that in perspective.
What is the difference between secured debt and unsecured debt?
Secured debt is when there is a security interest in real property or assets that are used as a guarantee that you will repay a loan as laid out in your loan agreement. If you do not meet the terms of the loan agreement, your secured creditors will have rights to the secured assets as a means to guarantee they get paid. The best examples of this in everyday transactions are home mortgages and car loans/leases.
What types of debt(s) can be settled?
Most any type of unsecured debt can be settled. For example:
- Consumer debt
- Credit card debt
- Business and/or commercial debt
- Slow or late payments
- Defaults
- Charge offs
- Debt collectors and/or attorneys
- Medical bills
- Utility bills
- Deficiency balances
- Store credit cards
- Major credit cards
- Pre judgment and post judgment settlements
- Bank account and/or wage garnishments
- Settlement and negotiations with nearly all creditors
- Loan re-modification
Can my wages be garnished?
Debt Collectors can be intimidating and may use questionable tactics that are designed to scare people into making a payment, even if they cannot afford it. Actual garnishment actions are not that common and you will have advance warning. Creditors must first file a lawsuit, get a judgment, and then get court authorization for a garnishment. You cannot just have your pay check, or any portion of it, taken without court approval, and you must receive notification and proper documents from the court first. Worst case scenario, you may need to negotiate a settlement that is higher than you would have liked.
Can I be sued if I use the debt settlement approach?
Creditors have the right to file a lawsuit if you are not paying a debt. Lawsuits, however, are not that common. It costs creditors money to take you to court. In addition, a judgment is just a piece of paper until they figure out a way to collect money against it. Threats of litigation are, however, much more popular, regardless of the fact that debt collectors are prohibited (by the FDCPA) to threaten legal action unless they're authorized to do so. Lawsuits can be avoided. It is very common to work out suitable arrangements with your creditors without ever going all the way through court procedures.
Can I still settle my debt if I'm currently being sued by a debt collector or creditor?
Yes. It is still possible to come to acceptable settlement terms during litigation or after a judgment has been filed.
Do you work with business or commercial debt?
Yes, we can assist companies and small businesses seeking debt relief.
