Debt Settlement has many names, such as Debt Arbitration, Debt Mediation, Debt Mitigation, Debt Management or simply Debt Relief but ultimately all these names translate into one thing and that is to, help individuals burdened with high unsecured debt or medical bills become debt free and avoid bankruptcDebt Settlement has many names, such as Debt Arbitration, Debt Mediation, Debt Mitigation, Debt Management or simply Debt Relief but ultimately all these names translate into one thing and that is to, help individuals burdened with high unsecured debt or medical bills become debt free and avoid bankruptcy.
How it Works
As a rule debt settlement works best for those individuals that are already in a defaulted status on their debts. If you are currently dealing with this issue or anticipate doing so in the future, call us us and see how we can help.
A debt settlement program will set you up with a new single monthly payment instead of the ones you are currently or would have been making to your creditors. This new monthly payment, as a rule is much lower than what you were making, will be placed into a third party holding account. It will not be distributed to your creditors on a monthly basis. This is not a bank account but a form of trust account. You will have full access to this account and if you wish to withdraw the money, you can do so. As money accumulates in this account and it has reached a point where there is enough to settle one of your debts, an agreement will be made between us and your creditor on your behalf.
Let’s say Mary has $12,000. In credit card debt. This debt is owed to 4 creditors.
Creditor 1 – $3,000 Creditor 2 – $2.500. Creditor 3 – $2,500 and Creditor 4 – $4,000.
Mary will be set up with a new monthly payment of $200.00 instead of the $400. She was previously paying to make minimum payments to the 4 creditors.
After a period, there will be enough money in her account to reach a viable settlement with one of her creditors, in this example let’s say Mary has paid into the program for 6 months and has $1,200 in her account. Creditor 1 or 2 will be approached for a settlement of almost 50% of the amount owed. Depending on who Creditor 1 or Creditor 2 is, the offer will be accepted. The funds are then withdrawn from Mary’s account and paid to the applicable creditor. Then the process starts over again until each and everyone of the debts enrolled into the program are brought to zero. (Settlement amounts vary from creditor to creditor, the numbers used in this example are not an indication or guarantee of every settlement amount)
It is important that for anyone who is considering using this program there are some consequences:
If your credit score has not already dropped, it will if you use this program. If you are receiving harassing telephone calls from your creditors, using this program will not stop your creditors from continuing to do so. They have the legal right to do so albeit with limitations. There is always the possibility that your creditor may pursue the debt owed in a court of law, in other words, you may be sued. We take every measure possible to avoid this and have years of experience avoiding this situation. Creditors find it best to settle rather than force the borrower into a bankruptcy situation.
For any additional questions you may have regarding Debt Settlement, please visit our FAQs.