| Q. | How is Debt Settlement different from Credit Counseling? | |||
| A. | Debt settlement is a legal solution designed to negotiate settlements based on what you can afford to pay your creditors. The amount of time required to complete a debt settlement program can depend on several factors, including how quickly you are able to accumulate adequate settlement funds. Typically, a legal debt settlement program allows a consumer to become debt free in 2 – 3 years. With credit counseling – also referred to as a Debt Management Plan – YOU PAY BACK THE ENTIRE DEBT BALANCES, INCLUDING ANY INTEREST AND FEES ACCRUED DURING THE PROGRAM. It can take anywhere from 5 to 9 years for a consumer to become debt free, and ultimately the consumer ends up paying more out of pocket. Is it any wonder that most debt management plans are sponsored by the credit card companies? | |||
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| Q. | Can ALL of my debt be negotiated? | |||
| A. |  Any type of UNSECURED DEBT can be successfully and legally negotiated. An unsecured debt is one that is not attached to a specific tangible item that could be repossessed by the creditor. For example, an auto loan or a home mortgage cannot be included in a debt settlement program because the creditor could legally repossess your vehicle or foreclose on your home. However, credit card debt, medical bills that have been turned over to collection agencies, store cards, signature loans, any unsecured lines of credit, and revolving charge accounts are all types of unsecured debts that can be included in our legal debt settlement program. |
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| Q. | What about Student Loans? | |||
| A. | Generally student loans are government backed and are extremely difficult to discharge even in a bankruptcy proceeding. However, private student loans that are not government backed may be eligible for inclusion in a legal debt settlement program. | |||
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| Q. | How will my credit be affected? | |||
| A. |  While you are in the debt settlement program, your credit score will decline because you will not be making payments to your creditors. However, the damage that could be done to your credit by declaring bankruptcy may be greater and far reaching, limiting your ability to obtain future credit as well as hindering employment and will remain in the public records for up to 10 years. |
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| Q. | Are there any tax liabilities to legal debt settlement? | |||
| A. | The Internal Revenue Service requires that creditors report any “cancelled debts” as “forgiveness of debt”, that is, that portion forgiven, over $600 as “income” to the consumer. This will often come in the form of a 1099 filed by the creditor. Depending on your financial situation, this may or may not create a tax liability for you; therefore, it is recommended that you seek the advice of your tax advisor. Generally debtors who are insolvent at the time of the “forgiveness” are not subject to tax liability but each situation is different. | |||
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| Q. | Can I be sued by my creditors? | |||
| A. | Creditors have the right to and may choose to pursue legal action against you. There is no way to prevent this. Most creditors, however, would prefer to work out a negotiated settlement than spending the money by taking a consumer to court. | |||
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| Q. | Can my wages be garnished? | |||
| A. | Whether a creditor can or cannot garnish your wages is governed by the laws in your state. Even then, a creditor must first bring a lawsuit and then obtain a judgment before acquiring the authorization for the garnishment. Some states do not allow any wage garnishment and even those states that do have regulations placing limits on garnishment. No one can garnish your paycheck without legal action and some form of due process and generally you must be given notice of any such court action through formal documentation. | |||
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| Q. | What if a creditor refuses to negotiate? | |||
| A. | Debt settlement is recognized as a viable option by creditors and collection agencies throughout the credit card industry. The Credit & Banking Law Group, P.A. has established contacts with the major financial institutions, collection agencies, and collection attorneys through years of previous debt negotiations. | |||
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| Q. | Can I negotiate settlement of my debts myself? | |||
| A. | Although it is possible for a consumer to negotiate settlement of one’s debts, there are several important aspects about the process that should be taken into consideration:
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| Q. | Should I consider filing for Bankruptcy instead? | |||
| A. |  Bankruptcy should be considered only as a last resort and after all other alternative debt solutions have been exhausted. There are numerous negative consequences to bankruptcy, including the possibility of losing your home or car, as well as an unfavorable impact on your credit report resulting in severe limitations to future credit and employment. Even though bankruptcy has some positive aspects, it is still considered a serious matter and will stay on your credit history for up to 10 years; therefore, it is wise to do everything in your power to avoid bankruptcy. |
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