1. What is Debt Settlement?
Debt Settlement is the process of negotiating your debts with the intent of obtaining a reasonable settlement. The negotiation process is quite daunting and requires constant monitoring and being educated about debt collection laws. A lender will usually settle if you meet the criteria or qualify for debt settlement.
2. Should I opt for Bankruptcy?
If you are not able to pay a settlement amount to your lender and you do not qualify for bankruptcy, it is a good idea to look into debt settlement. Note that unlike bankruptcy, debt settlement is usually some sort of “amicable” resolution between the lenders and yourself and therefore, there are no hard and fast rules for what you can get on a debt settlement. Additionally, it usually takes less time to recover the points on your credit. Unfortunately this statement is not always clear because there are many other factors that need to be considered when recovering your credit rating. For example if you still owe on your house, other debts owed, possible credit cards you are keeping and the frequency you are paying them.
3. Am I eligible for debt settlement?
If you owe more than 10K in credit cards you are eligible for debt settlement. In fact, you can also do a debt settlement on lesser amount but it is not recommended unless your hardship is overwhelming. The reason is that debt settlement will still affect your credit negatively. Someone might prefer to keep a perfect credit rather than taking a chance on debt settlement.
4. Can I negotiate on my own?
Of course you can and many people successfully do. There is a saying which says, “he who represents himself, has a fool for an attorney.”
a. Lenders now are very aggressive in pursuing their debts and they will try to negotiate to get the settlement in their favor;
b. borrowers or consumers are emotionally drained during the process and end up by taking unfavorable deals;
c. You will also have to educate yourself about the laws – including Fair Debtors Collection Practices; and
d. You will not benefit from the “cease and desist” letters preventing creditors to harass you for a debt.
5. At what point should I start my debt settlement?
You should consider debt settlement when:
a. You are faced with a genuine hardship;
b. You want to protect some assets from bankruptcy;
c. You are late on your credit card;
d. You have at least some money to work a deal out with the lender.
6. What happens if I ignore the collection calls and just do not respond.
First, the lender will try to collect from you. Then if you do not respond, they will sell or transfer the debt to a collection agency (which are far more aggressive than banks). If the collection agency fails, they will refer the case to an attorney’s office or have their own attorney file a lawsuit in your case. Unless you have money to pay an attorney to defend you, the lender will obtain a judgment against you. Once a judgment is obtained, they have a right to garnish your paycheck, levy your bank account and also attach a lien to any properties where equity is present. They will also pile interest and other fees on the top of the actual amount owned.
7. What happens if the bank or the lender already has a judgment against me?
At this point you can still file a bankruptcy or even try a debt settlement. Our law firm has represented many who already had a judgment against them. However, the settlement offer is usually higher than the regular offers.
8. Is it not better to do a debt consolidation?
Debt consolidation is the process of compiling all the debts in one. The problem is that often you will end up by paying the same amount plus the fees of the consolidation company. This is not really practical and economical. It also leaves the lingering pain of having debts on your mind. Furthermore, other lenders do not really like such programs.
9. I used a debt settlement company and I end by losing money.
This is a common complaint that we are getting from many of our clients. Many of the debt settlement companies were operating in an “abusive” way. For example, they would ask for advanced fees from the clients and ask the clients to put a certain sum in an “escrow or trust” account to be used at a later stage. The truth is that most of those clients end up falling behind in contributing to the escrow account and losing fees paid to the debt settlement company. The clients ultimately found themselves in a worse position, and ended up filing for bankruptcy.
Our law firm negotiates your debts and does not ask for any advance fees or “escrow” accounts. Furthermore, the FTC has outlawed such practices in October 2010. Call us for more details at 510 742 5887.
10. What kind of debts can be settled?
It is easier to settle unsecured debts such as:
a. Credit cards
b. Lines of credit
c. Hospital bills
d. Already foreclosed properties second and third loans