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FAQ - frequently asked questions about our programHow does your debt settlement program work?The increasing challenges in our economy, job losses, medical hardships, and even the recent credit “cram down” (lowering available credit balances and increasing rates) continues to force many consumers to view all of their options for debt relief. Options range from continuing to make minimum monthly payments for a very long time, credit counseling, bank or personal loans, bankruptcy, doing nothing, and debt settlement (settling with your creditors for less than your balance due). All programs should be reviewed by a consumer that needs debt relief, but we strongly urge you to consider our debt settlement program as a more viable option to any other program that provides debt relief. Receiving more information about our debt settlement program is easy and best of all, free. Our debt consultants are highly skilled and trained to personalize your program to fit your needs. Everyone that enters a debt settlement program has a different makeup of creditors and financial hardships that need to be taken into consideration by the debt consultant. We want your first experience with us to be informative, helpful, and provide comfort in the knowledge that a very experienced team of professionals will be your debt advocate as you progress and settle your accounts. Most other debt settlement companies use debt consultants that are nothing more than short-term high- pressure salespersons. In contrast, our consultants must spend time on the negotiating floor and have typically already personally dealt with the creditors you wish to enroll. A typical program length varies between 12-42 months and is primarily predicated on the time you require to save enough funds to settle all of your enrolled accounts. Some clients are able to complete their program very quickly if they are able to borrow funds, sell an unwanted asset, or use tax return refunds to add to their personal settlement savings. We have settled millions of dollars since 2003, and we can tell you one of the most important tools to managing your successful debt settlement program is the use of your credit reports. Upon enrollment, and from time-to-time thereafter, we will ask you to pull your credit report (don’t worry-it’s easy!) and provide a copy to us. The credit report will inform us of which creditor or debt collector is reporting your account to be settled, how (or if) it is being reported, and arguably most important, evidence that you have paid off your account. When you become our Client, we will inform you on how to handle creditor and collector calls. When we negotiate, we deploy a combination of acquired settlement techniques and skill, “insider” contacts gleaned from years of past settlements, creditor and collector settlement down trending percentage analysis, and just plain old-fashioned “nose-to-the-grindstone” hard work. Additionally, our negotiating teams are compensated with bonuses based upon achieving lower settlements for you. In that manner, they become your personal debt advocate and work tirelessly to get you the best possible settlement deal. How do I qualify for your debt settlement program?A good candidate for our debt settlement program is a consumer that: (1) can no longer afford to make minimum monthly payments and therefore will go past due within a short period of time, (2) is already past due with one or more accounts and finds it difficult, if not impossible, to catch back up to a current status, (3) is considering filing bankruptcy (but would like to avoid it), (4) has a minimum of $12,000 in unsecured debt. In addition, we would like to know what type of financial hardship you have been going through. Medical hardships, job losses/continued unemployment, divorces, litigation, are examples of hardships that can be used in the negotiation and settlement process. Our debt consultants want to know these, and any other hardships you may have endured. How much does your program cost and when do I pay your settlement fees?There is a small enrollment/underwriting fee based upon a single consumer or joint (with spouse) applicant. This fee helps defray the cost of advertising, marketing, underwriting, time spent analyzing your credit report, entering you into our system, sending you a Welcome Package, and yes, even paying a sales commission (even debt analysts have bills!). Then, each month, there will be a small monthly service fee to maintain your Account. You may cancel at anytime (cancellation policy) and not be obligated to pay monthly fees or any fees on unsettled accounts. At time of settlement, we charge a small settlement fee based upon the amount you have saved. We do not charge settlement fees in advance or base your fees on your total debt (ouch!) like most other debt settlement companies. How does debt settlement affect my credit?Any debt settlement program will likely have an adverse effect on your credit score until you settle your accounts, pay your bills on time, and then continue to establish new credit. If your accounts are already seriously delinquent (collections and beyond) at the time you choose to enroll into a debt settlement program, the adverse effect on your credit score may be much less. While in a debt settlement program, if your accounts were current at time of enrollment, and you are not making regular payments to your creditors, your accounts will be reported as late as the delinquency period extends (60, 90, 120 days). In addition, the amount listed on your credit report, as the current balance due, will increase as the creditor adds interest and/or late fees. If you have reached or exceeded your credit limit on some or all of your accounts at time of enrollment, it is likely that your credit score has already been adversely affected. One of the debt relief alternatives, bankruptcy, could stay on your credit report for 7 to 10 years. Additionally, those with a high credit score must weigh the negative impact on their credit scores against the risk of bankruptcy and the potential of settling the debt for significantly less than what they owe. Even if your accounts are current, your credit score may be negatively impacted if you have approached your credit limits, met your credit limits, or exceeded them. In these economic times, many credit card lenders have arbitrarily reduced credit limits on credit cards and loans that initially had higher available balances. The result so far appears to be another negative impact on credit report scores. Interest rates on credit cards are increasing, making monthly payments less affordable and more difficult to pay on time. One of the key ingredients that makes up your credit score is your debt-to-income ratio. This ratio compares how much you make to how much you owe. Consumers with less debt and more income typically achieve higher credit scores over time. When you settle an account, that account moves from the current derogatory section of your credit report to the closed account section. With each settlement comes light at the end of the tunnel. Aging derogatory reporting appears to have a much less adverse effect on your credit score as months go by. After delinquent accounts are settled, some lenders may discount that fact that you once had a negative account (usually after twelve months). It also appears that keeping other debts (house, car, secured accounts) current while in a debt settlement program tends to keep credit scores from dropping lower when compared to “letting everything go”, thereby making credit score recovery faster and easier. However, debt settlement should not be used or substituted for credit repair. Can I perform debt settlement myself and save the money I will spend in fees?Anyone can call a creditor or debt collector and make a deal. Do you know when that particular creditor or debt collector tends to settle for much less money? Do you think you will be alerted when certain creditors and debt collectors have a “fire sale”? Do you know how to negotiate without revealing private information about yourself or others on the account to be settled? Do you know what a good settlement percentage is? Do you have the time and are you willing to commit hours of work to negotiating, and verifying your settlement? Do you know how to keep your settlement funds safe from predatory debt collectors? Do you know how to slow down or stop collection calls? Are you aware that every settlement letter must contain at least 10 line items to ensure that the debt can never be collected upon again? Do you have software or a system to track your progress? Can you accurately decipher your credit report and determine what priority your debts need to be settled? The do-it-yourself pundits would have you believe that there is little a debt settlement company provides that you cannot do yourself. However, have you ever seen them give you step-by-step instructions on how to succeed? Who pays my creditors and debt collectors?Lawgistix DOES NOT disburse funds to your creditors or debt collectors. The purpose of our debt settlement program is to create a debt settlement plan for you, then negotiate the balances you owe to your creditors and debt collectors. Your entry into our debt settlement program is validated by the fact you are unable to make your regular monthly payments, and instead set aside funds into your personal savings Account to be used for reduced settlements on the balance you owe. Once you approve of a settlement offer, you will then make a payment directly from your Account. Once paid, you will receive a final verification from the creditor or debt collector that your account has been paid in full. Do you provide a settlement guarantee?You should be very cautious about any debt settlement company that guarantees, in advance, the amount of your settlement percentages. Debt settlement companies that offer percentage guarantees in advance usually bury very ambiguous language in their agreement with you that states how they will calculate your refund if they do not achieve the settlement percentages they originally promised. Their refunds only apply to the amount exceeding 100% of your balance at time of settlement. If they settle for 105%, then you would be refunded (more likely credited-they don’t like to give cash back) a mere 5% of the total fees that you have paid on that account. If you paid a $100 fee to settle an account, the total amount of refund to you would be a lousy 5 bucks. We instead choose to let our past performance record stand as a better indicator of what settlement amounts we will be able to achieve for you. How is my personal information kept confidential?Lawgistix always considers your private information to be extremely confidential and never discloses your information to any third-party without your prior authorization. With literally millions of transactions since 2003, we have never received a single complaint from any Client claiming that we had violated their privacy by disclosing information. Please review our Privacy Notice. Will your program prevent legal action against me?No debt settlement program can completely stop a creditor from using legal means to collect the amount they are owed. In our experience, a small minority of consumers are involved in collection lawsuits. When a lawsuit does occur, it is more likely to be from an original creditor rather than a debt collection agency. A few rogue debt collection agencies will threaten a lawsuit (which is illegal if they have no intent to do so). Other debt collection agencies are also law firms. Many of theses law firms have been facing intense scrutiny as they have been known to file legal actions without the benefit of possessing the required documentation to support their case against a consumer. In either event, the threat of legal action or an actual lawsuit can be settled in much the same manner as a non-legal account. You can expect to pay a little more to settle a lawsuit, but with a debt settlement program, it is not the amount you settle for on a single account, but rather the overall settlement percentage you have achieved on all of your accounts in the program. The threat or an actual filed legal action against a Client may provide a negotiator with increased leverage against that Client’s other accounts, thereby reducing the overall average settlement percentage of the Client’s program. We are not a law firm and cannot provide legal advice. However, we will work diligently with creditors in an attempt to settle the account, even when legal action is pending. How does bankruptcy compare with debt settlement?Usually considered as a last resort, bankruptcy has many negative long-lasting implications. Bankruptcy may be the quickest means of resolving your outstanding debt, but even bankruptcy attorneys will tell you that it could remain on your credit report for a long time.
Chapter 7 bankruptcy will stay on your credit report for up to ten years, and Chapter 13 stays on your report during the time you are in a bankruptcy program plus a specified time calculated from the date you have completed the program. Even if the bankruptcy is no longer on a credit report, it remains forever on public record. One of our Clients was heard saying, As a condition of employment hiring, and especially for government and security-type jobs, most employers are more frequently using credit reports as a hiring tool. Applicants with bankruptcies on their credit record could potentially be affected. On home mortgage applications, consumers are asked if they have ever filed for bankruptcy. Answering “no” to the bankruptcy question when if fact bankruptcy was filed is a federal offense. Filing bankruptcy will likely result in paying higher interest rates and costs on future home loans, auto loans, and other credit. Additionally, many insurance agencies are using credit reports as a predictor in how a potential insured will pay his insurance premiums on time. With lower credit scores usually come higher premiums for the same insurance policy that another consumer was able to obtain for a far cheaper rate when having great credit.
Should you decide to file for bankruptcy, first seek the legal advice of a licensed attorney. If you have enough discretionary income and wish to work on resolving your debt over time, our Debt Settlement Program may be a better alternative. Are settlement savings taxable?Original creditors are required to report canceled debts that exceed $600 to the IRS and you are supposed to report that on your tax return as income. However, the IRS allows you to “offset” that amount by any amount you were insolvent for at that time. Unless you have a positive net worth, then you ordinarily will not be required to pay taxes on the forgiven amounts. Even if you are solvent, you may be able to deduct certain fees and/or interest that have accumulated on your account. If you should receive a notice from a creditor that a debt has been canceled or forgiven, we advise you to seek the advice of a qualified accountant. Review and take the following IRS publications and forms with you.
Is credit counseling or debt consolidation the same thing as debt settlement?No. Debt settlement is defined as negotiations that lead to a settlement of less than the balance owed. Debt consolidation normally requires a new loan, such as bank financing, to pay off your unsecured debt. Unsecured consolidation loans have become primarily a thing of the past as banks opt to secure consolidation financing with an asset, usually your home. Many financials experts frown on the practice of securing your once unsecured debt with a huge asset like your home. If your financial condition should worsen, and your new loan cannot be repaid, your home could be in jeopardy. Additionally, home values are not increasing as they once were, and you could be “upside down” (owing more than what your house is worth). A majority of the consumers taking out consolidation loans go deeper in debt and don’t recover. Using a credit counseling program means that you agree to pay the principal balance due, plus interest, which in most cases makes a consumer’s monthly payment under the credit counseling program higher than if the consumer continued to make only minimum monthly payments. Their program typically involves a credit counselor meeting with the consumer or having a telephone interview whereby the credit counselor would analyze the consumer’s unsecured debts (determine what interest rates at which the creditors will accept you into the program), and other obligations such as including income and expenses. The credit counselor then formulates a monthly budget plan that includes lowed interested rates (as accepted by creditors) and sometimes fees. Their industry reports that all credit counseling programs include repayment of interest at between 11% and 13%. Since many credit cards (unsecured debt) were placed into the program at those interest rates, we believe the benefit of credit counseling is very small as it still takes 6-8 years to repay all of the principal and interest. We suggest that is why the failure rate is very high. There is simply not enough relief, especially in this economy when we are still having reductions in salaries and layoffs. Nevertheless, any program is better than paying your minimum monthly payment for years and not reducing your principal. In comparison, we feel debt settlement is a much more viable option for most consumers. The consumer credit counseling industry reports their success rate (completion of their program) at a paltry 21% to 26%. In other words, 3 out of 4 people who enter credit counseling do not finish the program. Contrary to their claims, many credit counseling programs will appear on a consumer’s credit record, which then may be viewed negatively by most lenders, including home loan lenders. Some credit counselors fail to make their customer’s payments to their creditors on time, resulting in late payments being reported on their credit report. Their industry is “subsidized” by the credit card industry in what is commonly known as “fair share”. Credit counselors periodically receive money from most of the creditors (the very same people you owe money to!) accounts that the consumer enrolled. Most operate very profitably on so-called “non-profit” status or “charity” that has come under intense scrutiny from the IRS. Since credit counseling agencies are paid by the credit card industry, they truly do not represent the consumer. What results can I expect to achieve?We publish our average settlement percentages every year. For this year, we are averaging slightly over 34% of the current balance. Every Client has a different make-up of creditors and financial hardships, so individual results may vary. To obtain your true savings, you would need to factor in the fact that if only minimum payments were made on your account(s), the pay off time could easily be 25-30 years! If you add up all of your minimum payments, and consider that your pay off balance will be same after many years, the savings of a debt settlement program become very apparent. Will fees and interest continue to accrue?Most creditors will continue to charge interest and fees until the debt is written or charged off. This time frame is typically 120-210 days but may be longer. Again, you must consider the overall positive benefit of a debt settlement plan versus these additional costs. What is secured vs. unsecured debt?Examples of secured debt would be a home mortgage loan or an auto loan for which you have pledged that home or auto as collateral security. If you fail to make timely payments, the collateral (in this case, house or auto) may be foreclosed upon or repossessed. You may still be liable for any deficient balance after the creditor has taken possession of and sold your property. In that case, it is your sole responsibility to seek the advise of a qualified attorney in order to protect your assets. Government student loans and other subsidized student loan programs are not secured, but they cannot be entered into our debt settlement program as they hold a guarantee. Examples of unsecured debt are any loan or debt that has no tangible asset guaranteeing the loan. The most common types of unsecured debt are credit cards, department store cards, medical bills, personal and bank loans, unsecured lines of credit, housing or vehicle deficiency judgments, delinquent professional fees (accountants, lawyers, doctors, etc.), and gasoline cards. If you have a debt that you are not sure is secured, be sure to mention it to your debt consultant when you enroll. Will I continue to receive collection calls?Most of your original creditors are cooperative and will stop or significantly reduce calls once they have received your financial hardship letter from us. Lawgistix is the only known debt settlement company that has a proven 100% funding rate when we negotiate and settle an account with a creditor or debt collector. Therefore, the creditors and collectors know that when we present a deal to them, we are serious and intend to fund (please review the comments about Lawgistix from creditors and collectors). In your Welcome Package, we explain how to minimize calls from debt collectors and your federal rights under the Fair Debt Collection Practices Act (“FDCPA”) should a debt collector engage in telephone harassment. You may have additional rights against telephone harassment in your state. |
