Debt Settlement Chart:

Figures provided on this page are examples only. Individual results may vary and are based on ability to save funds and successfully complete of all program terms. Debt Settlement program does not assume or pay any consumer debts, and does not provide tax or legal advice. Program not available in all states. Read and understand all contract terms prior to enrollment.




- How does this program work?
- Will this strategy work for me?
- What are the tax consequences?
- What about lawsuits?
- Can my wages be garnished?
- What kind of debt can be negotiated?
- What if a creditor won't negotiate?
- Are there debts that can't be entered into the program?
- Can I do this myself?
- Don’t I have to pay taxes on the money I save?
- What if I leave accounts out of this program?
- What credentials or affiliations do you have in negotiating these terms, etc?

Q: How does this program work?

Debt Settlement works by settling the balance owed (principal) on your unsecured personal debt accounts through the time-honored process of creditor negotiation. This is different from simply reducing the interest rate as with Debt Consolidation and Credit Counseling, which do not affect the total debt balance. By settling the balance itself, Debt Settlement provides a much faster means of eliminating your unsecured debt. Most creditors are willing to accept 50%, 40%, sometimes as low as 20% of the balance owed in order to close out an account rather than lose the entire amount in a bankruptcy proceeding. From a business perspective, it is a matter of the creditor receiving something rather than nothing, as would be the case in most bankruptcies. Of course, different creditors have different policies, but as a rule, discounts of 50% or greater are routine in the industry. As a consequence of this approach, money that was previously wasted on endless minimum payments (most of which went toward interest charges) goes toward settling the actual debt balance. That's why Debt Settlement through negotiation is the fastest debt elimination method short of Chapter 7 bankruptcy.

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Q: Will this strategy work for me?

While the debt settlement approach is not suitable for everyone, its flexible nature makes it applicable to a wide range of financial circumstances. For individuals and families seeking an alternative to bankruptcy, there is simply no better option to get out of debt. Here are a few guidelines to help you determine whether or not debt settlement is something you should consider:

1. Do you have a legitimate financial hardship condition?
Most debt problems are caused by loss of income, medical issues, or divorce/separation. These are legitimate financial hardships that can happen to anyone through no fault of their own, and any one of these situations can wreak havoc on a household budget. The important point here is that the debt settlement system is not a "free lunch" for people who don't feel like paying their bills. If you are over your head due to a hardship circumstance, and you'd prefer to work things out with your creditors rather than declare bankruptcy, then debt settlement can provide an honest and ethical debt relief alternative.

2. Are you committed to finding an alternative to bankruptcy?
Debt settlement is best viewed as a bankruptcy alternative, one that allows you to keep control over the process and maintain privacy while working through your financial difficulties. As with most things in life, success is determined by your level of commitment to staying the course, even when the road gets a little bumpy. If you are likely to give up at the first rough spot, then debt settlement is probably not the best choice for you. But if you are determined to find an alternative to bankruptcy, debt settlement will likely be the most attractive debt solution for you.

3. Do you owe more than $10,000 in unsecured debt?
We are the first to admit that debt settlement is strong medicine, and it should be reserved for serious debt problems. While everyone's budget is different, most people can work their way out of smaller debt obligations. If you only owe $5,000, for example, unless you are really in dire straits you can probably deal with that obligation the old-fashioned way - by paying off the debt in full, over time. In other words, smaller debt loads are more of a budgeting problem than a serious financial hardship. At Debt Remedy Solutions, we use the benchmark of $10,000 for evaluating whether or not a prospective client qualifies for our program. (Note: Exceptions are sometimes made based on hardship circumstances, so the $10,000 figure should be used as a rule of thumb or guideline. If you aren't sure whether you meet the requirement, please call one of our knowledgeable representatives at Toll Free Number: (866) - 857 - 3328 for a free, no-obligation consultation.)

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Q: What are the tax consequences?

Financial institutions are required to report canceled debts over $600 (the portion forgiven during the settlement transactions) to the IRS, and the debtor is required to report that as income on their tax return. However, the IRS permits you to offset any "income" from canceled debts up to the amount you were "insolvent" at the time the debts were canceled. You are "insolvent" if you owe more than you own, or in other words, if you have a negative net worth. If you're deep in debt, it's not likely that you have a positive net worth, so it's rare that a client would have to pay taxes on the forgiven debt balance. The exception might be an individual with a high level of home equity, which might make the overall net worth positive and thereby eliminate the insolvency exclusion. However, this is the exception rather than the rule. Our view is that even in the unlikely circumstance that you might owe tax on the forgiven debt balance, you'll still be way ahead of the game by eliminating your debt balances sooner rather than later.

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Q: What about lawsuits?

While creditors have the legal right to bring a lawsuit for non-payment of a debt obligation, such lawsuits are far less common than most people think. It costs money to sue someone, and a legal judgment is simply a piece of paper unless there is a way to collect money against it. The threat of litigation, on the other hand, is all too common, even though debt collectors are not supposed to threaten legal action unless they are specifically authorized to bring suit. In general, lawsuits can normally be avoided, provided you are willing to work out suitable arrangements with your creditors through the negotiation process. Contrary to popular belief, most creditors would rather work things out amicably in a negotiated settlement than spend more money taking a customer to court (with no guarantee of being able to collect on a judgment). That's why thousands of litigation-free settlements are transacted every month all across the country. Creditors won't admit it publicly, but our method works much better for them than forcing people into bankruptcy through overly-aggressive collection techniques. While Debt Remedy Solutions is not a law firm and does not provide legal advice, we do want our clients to understand that the worst-case scenario is that a client might be required to pay a debt balance in full in the event of legal action by a creditor. This is little different from the starting situation most clients find themselves in, and again, it is a fairly rare occurrence.

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Q: Can my wages be garnished?

If you listen to some debt collectors, you might be fooled into thinking that they will seize your very next paycheck unless you make a payment right then and there. The threat of losing part of one's wages to a garnishment action is truly frightening to someone already struggling financially. But this is mainly an intimidation tactic used by collectors to scare people into committing to a payment schedule whether or not they have the funds available. Actual garnishment actions are relatively rare, and do not happen without advance warning. First, a creditor must bring a lawsuit, obtain a judgment, and then take an additional step to obtain authorization for the garnishment. Plus only one creditor can garnish your wages at a time.  No one can take your paycheck without court approval, and you must be given notice of such court action through formal documentation. So don't be fooled by one of the oldest collection tricks in the book.

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Q: What are the differences between Debt Settlement and Credit Counseling?

The most important difference between these two programs is that with credit counseling, you pay back all of the debt balances, plus interest and fees, whereas with debt settlement, you pay back only a portion of your debt load. That's why debt settlement is a much faster path to debt freedom (2-3 years) than Credit Counseling (5-9 years) for unsecured debts. This means a lot less money out of your pocket is used through the debt settlement approach. Another key difference is that your debt settlement firm works solely for you, the consumer, and receives no compensation directly from the creditors. In other words, your debt settlement firm is truly on your side. With a credit counseling agency, there is a dual relationship, where part of their income comes from the client and the majority of it comes from kickbacks paid by the creditors. This creates a built-in conflict of interest and creates doubt as to whose side the agency is really on. Also, debt settlement provides much more flexibility than credit counseling in both the monthly budget level and the types of accounts that may be enrolled. For example, if you have a really tough month and need to skip a payment, that situation can be absorbed by a debt settlement program, whereas it will cause serious problems with a credit counseling program. Further, if your accounts have "charged off" and gone into the third-party collections cycle, you can still enroll those obligations in a debt settlement program where they will be rejected by a credit counseling agency.

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Q: What kind of debt can be negotiated?

As a general rule, any type of unsecured debt can be successfully negotiated. An unsecured debt is one that is not tied to a specific material item that could be repossessed by the creditor. So an auto loan, for example, could not be included because the creditor could legally repossess the vehicle. Credit card debt, medical bills in collections, department store cards, signature loans, unsecured lines of credit, and revolving charge accounts are all types of accounts that can be included in our program. The main exception here are student loans, which in most cases are government backed loans that cannot even be discharged in a bankruptcy proceeding. (Private student loans that are not sponsored by the government can be included.)

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Q: What if a creditor won't negotiate?

In the course of business, we have established contacts with the major banks, collection agencies, and collection attorneys. Debt settlement is recognized as a viable solution by collection industry professionals, and at Debt Remedy Solutions we pride ourselves on the professional reputation we have established by dealing fairly with creditors. In the rare instance where a creditor balks at accepting a reasonable settlement at the time it is proposed, it is often a matter of simply waiting for a different phase of the collection process. Some creditors are more inclined to play "hardball" than others, but virtually all of the major institutions eventually sell their accounts to collection agencies in order to get what they can for the account. Since the collections agencies acquire these accounts for pennies on the dollar, they are more inclined to accept a reasonable settlement offer, which still represents a profit on their purchase.

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Q: Are there debts that can't be entered into the program?

Secured debts cannot be entered into our debt settlement program. This includes home loans, second or third mortgages, equity lines of credit, auto loans, and financing contracts tied to a specific piece of property that may be legally repossessed by the creditor. Federal student loans, although unsecured, must also be excluded from the program. In addition, Federal and State taxes cannot be included.

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Q: Can I do this myself?

Yes, it is certainly possible for a consumer to negotiate his or her own debts. However, there are several important factors that should be taken into consideration before making such a decision. First, do you have the time? For individuals with serious debt problems, the complexities of the negotiation process can be very time consuming. Many people simply do not have the time to add this labor-intensive task on top of an already busy work schedule. Second, it requires a certain kind of psychological toughness to haggle with creditors. The average consumer is hampered by the embarrassment and shame they feel over having gotten into trouble. With all the tricks, traps, and pressure tactics used by creditors, most people will find themselves better off with professional assistance. Third, as with any profession, there are techniques not easily mastered by an amateur. Without professional coaching, the likely result will be high-percentage settlements in the best case, and outright failure in the worst case. When you consider that the total payout including professional fees will still be far less than your original balances, it makes more sense for the average person to obtain debt help from Debt Remedy Solutions.

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Q:  Don’t I have to pay taxes on the money I save?

Yes you may have to pay income taxes on the amount you save, but this amount is usually still much less than the amount you would have paid in interest. Check with an accountant for details.

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Q:  What if I leave accounts out of this program?

We do not recommend leaving any accounts out of the program for two reasons:

1. There is a good chance the credit company will see delinquencies on this or on your other accounts and close your account anyway.
2. It makes it extremely difficult for us to negotiate with some creditors if they see you defaulting on their account and not others and hurts the settlement process.

Having an ATM/debit card that is also a VISA or MASTER CARD tied to your checking or savings account is a good alternative that will leave you with a credit card you can continue to use without affecting this process.

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Q:  What credentials or affiliations do you have in negotiating these terms, etc?

We are members of a professional organization that specializes in this type of debt settlement negotiation. Including “The Association of Settlement Companies” and our Professional Debt Arbitrators and Trained and Certified by “The International Association of Professional Debt Arbitrators”

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Figures provided on this page are examples only. Individual results may vary and are based on ability to save funds and successfully complete of all program terms. Debt Settlement program does not assume or pay any consumer debts, and does not provide tax or legal advice. Program not available in all states. Read and understand all contract terms prior to enrollment.