Frequently Asked Questions:

Are all Debt Settlement Companies the same?

No.  The company you choose to go with  is a critical decision. So do your homework.  Larger companies that have been in business longer can be a safer bet, and they will tend to have better relationships with the various creditors.  Make sure to check a company’s ratings, and confirm how long they have been in business by checking their license status on your state’s Secretary of State website.

How do I qualify ?

There is no income or credit score requirements for debt settlement.  The program is based on need and available to anyone that will benefit from it.

How long does it take to complete the program?

The average term for a debt settlement program is 48 months, but this can be significantly speed up if you are able to send in additonal amounts from time to time. Make sure to discuss this with a consultant before signing up.

Are there any tax consequences?

Forgiven debt might be considered income by the IRS.  But there are various things your CPA can do to either minimize the liability, or have you exempted.  It’s always advised to consult a tax professional regarding situations like this.

Can I do this myself and save money?

You can, but if you are not a finance expert it can be a very frustrating and time consuming experience.  Larger debt settlement companies with years of experience will tend to have more negotiating power and better relationships with your creditors. This can result in larger discounts and better results. 

What types of debt do not qualify for debt settlement programs?

The program is designed for unsecured debts like credit cards, medical bills, personal loans, and collections. Any debt tied to collateral like car loans, and mortgages will not be elligible. Federal student loans, and other government debt like unpaid child support are also not elligible.

Will my credit rating be affected, and if so how long will it take to rebuild my credit scores?

In the beginning your credit scores will be negatively impacted. There is no getting around this.  It can take several months or more for the settlement negotiators to work out the new agreements with your creditors, and during this time they will not be receiving their normal monthly payments. But after a few months they will stop reporting the late payments and then your scores will start to steadily rise as the amounts you owe consistantly go down.

What are the avergage fees for a debt settlement program?

Fees vary, but debt settlement companies generally charge between 15% and 25% of the settled debt amount. This amount is typically built in to your fixed monthly payment, so there shouldn’t be any additional charges.