Debt Settlement - Vital Information

What is a “settlement” when referring to a debt? A settlement is a mutually agreed upon amount of money that you will pay to a creditor to completely resolve a debt. Often these amounts are substantially less than the balance due on the account. There are two key components to a settlement (1) both parties agree that the amount is acceptable and (2) after that amount of money is paid the debt is satisfied and nothing further is owed to the creditor.

Settlements can be achieved on unsecured debts. Unsecured debts are debts do not have collateral pledged as part of the credit agreement.

Collateral is usually some form of property that the borrower pledges to the creditor to secure payment of the debt. In this case if the borrower does not pay as agreed, the creditor may seize the property. Such arrangements are known as secured debts.

Settlements might be arranged on secured debts if the value of the collateral is insufficient to repay the entire amount owed or if the collateral is difficult for the creditor to obtain and sell for cash. These circumstances almost always require the borrower to surrender the collateral (particularly in the case of car loans) before a settlement can be reached.

Debts are settled one at a time, often working from the smaller accounts to the larger ones. As a result some of your accounts will be settled sooner and some much later. This means some of your accounts could go a year or more without settlement. The speed of settlements depends entirely on the amount of money the debtor has available for settlements. The faster funds accumulate the less time it will take to settle the debts.

Creditors are under no legal obligation to negotiate settlements with borrowers. The majority of them do, but they are not required to do so. Some creditors refuse to negotiate while others will determine the extent to which they will negotiate based on several factors including a review of the borrower's credit file and any other information they might require. A few creditors refuse to negotiate with third party settlement firms or credit counseling agencies.

If you are current on your monthly debt payments and can continue to remain current, a debt settlement program can harm your credit. Creditors have no reason to negotiate settlements on accounts that are current. They are willing to negotiate settlements on accounts that are significantly past due. As a result, someone who is current would have to fall several months behind on his/her debts – sometimes as much as six months before a settlement can be reached.

Debt Settlement programs are designed to benefit debtors who are either already behind on their debts or who are about to fall behind due to a decrease in income or some other financial hardship.

Working with Debt Settlement Companies

The mere fact of enrolling in a debt settlement program does not prevent creditors from taking collection actions such as phone calls, lawsuits, etc. Nor can a debt settlement program prevent your account balance from going up due to interest and fees being added to the accounts. Thus, debt settlement companies offer no tangible benefit in this area.

Debtors can negotiate directly with their creditors. Yes, you can do it yourself no matter what debt settlement companies might tell you. Most of them will tell you that you can't or that you can't do it as well as they can. This isn't true.

Most debt settlement companies will not begin negotiating with your creditors until you have accumulated sufficient funds to pay a lump sum to the creditor. Though each settlement company's policies may vary, a rule of thumb is that negotiations are started when you have 50% of the outstanding balance saved. Exceptions to that rule sometimes occur and some debt settlement companies might start negotiations with less than that available but the above is a general rule of thumb. The important thing to remember when enrolling in a debt settlement program is that unless you already have a lump sum of money to work with, negotiations will not start until you accumulate sufficient funds. The length of time involved depends on the amount of money you're saving per month and the balance due on any particular account.

A debt settlement company can present you with an estimate of how long it might take to settle your accounts. Such an estimate assumes creditors will agree to settle at some particular percentage of the balance due and that funds will be saved at a certain rate. If you can not save money for settlements at the rate discussed at the beginning of the program the time frame will lengthen and the settlement program could fail entirely. If you have any questions about the time estimate you are given be sure to get them to explain to you how they arrived at the figure.

Debt settlement companies cannot accurately predict the results they can obtain for you in terms of savings or time in the program. They should be able to tell you an average of savings obtained on all accounts they have handled in the past but they cannot in any way be sure that this performance will continue or will be achieved on your particular accounts. Any claims made in terms of savings or time necessary to get out of debt should be also accompanied by a statement of what percentage of their clients have achieved the claimed or promised results. If that disclosure is not made along with the savings or time claims, the debt settlement company concerned is being less than honest.

Our Service

CarePlus Financial's Credit Card Debt Consolidation Program is designed to teach you how to consolidate your debts using debt settlement techniques. The success of the program depends entirely on you. You determine how much you're going to save each month. You determine whether you're going to apply the techniques we're teaching exactly or alter them for whatever reason. You determine the outcome of any conversation you have with one of your creditors.

We therefore make no claims as to what you can save through settling your own debts or how long it will take you to get out of debt using the techniques and advice we are making available to you. Successful negotiations depend entirely on your communication skills, organizational skills and how well you actually apply the advice we make available. In other words, you – and you alone – determine your results. We can show you how to do it but you're the one actually negotiating with your creditors.

We charge a monthly membership fee of $24.95 for our debt settlement assistance clients to access exclusive content on our website as well as phone and email support from our staff. The total cost of the program depends on how long you keep your membership active. You are free to cancel it at any time so the total cost of the program can be as low as one month's membership fee or as high as several years worth of membership fees if the membership is active for several years.