Debt FAQ

How does your program work?

The process is simple:

• Fill out our no-obligation request form with some basic information.
• One of our representatives will contact you to discuss your debt
• Our representative will then contact your creditors to negotiate the lowest interest rates and your reduced fees
• We will then combine your bills into one, lower monthly payment that allows you to easily pay off your debts in just a few short years!

What is Bankruptcy?

Bankruptcy is a proceeding in a federal court in which an insolvent debtor’s assets are liquidated and the debtor is relieved of further liability. There are four types of bankruptcy, Chapter 7 (liquidation for individuals and businesses), Chapter 13 (reorganization for individuals), Chapter 11 (reorganization for individuals and businesses), and Chapter 12 (reorganization reserved for individuals in the farming and fishing industries).

Chapter 7 bankruptcy is when the court appoints a Trustee who may liquidate or sell some things that you own to pay your creditors. Most of your debt will be canceled, but you may choose to pay some creditors, usually to keep a car or home in which the creditor has a lien.

Chapter 13 bankruptcy is when your debt is reorganized into a single monthly payment. The payment will continue for 36 to 60 months. In no case may a plan provide for payments over a period longer than five years. You do not have to repay all of your debt. You pay only as much as you can afford, but the minimum payment may be affected by property you want to keep. When you complete the payments, debt not paid is discharged.

Chapter 11 bankruptcy is a form of reorganization, in which you follow a payment plan to your creditors under the discretion of a bankruptcy court. Unlike Chapter 13, which caters only to individuals, Chapter 11 may be filed either by individuals or businesses. In reality, filers almost exclusively are businesses, because the process is more expensive and complicated than filing Chapter 13.

Chapter 12 bankruptcy is a form of reorganization, in which you follow a payment plan to your creditors under the discretion of a bankruptcy court. It is quite similar to Chapter 13, the main form of reorganization bankruptcy for consumers, but is tailored only to certain individuals. Because of the specific nature of their livelihoods, Chapter 12 is only for farmers and fishermen whose debt is comprised of at least 80% occupational costs, and who owe less than $1,500,000. Among the powers of Chapter 12 is the ability to release liens on property that is necessary for work.

Bankruptcy should be considered a last resort for any struggling debtor, as it is a public record, and may stay on your credit report for up to 10 years.

What is Debt Consolidation?

Debt Consolidation is a service created by your creditors to help them recover their losses, and allow you to pay off your current debts in an average of 3-6 years. With this program only the debt interest, not the principal, is negotiated. It may take up to six years (or more) to pay off your debt and you will have to pay the entire principal amount. Most creditors, usually require that you take out a loan against your secured assets, like your house or car.

What is Debt Settlement?

Debt Settlement, also known as Debt Negotiation, is a method in which the principal amount you owe is negotiated with your creditors. Debt Settlement is a proactive approach for debtors who are experiencing the stress of having too much debt. Plus, it is the most cost-effective option to pay off your debts and relieve you of having to file bankruptcy.

How long does Debt Settlement take?

This really depends on your total debt balance and the length of time it takes for you to build up the necessary funds to settle. The typical debt settlement program takes about 30 months but the actual time can vary between 15-48 months. Every situation is different.

Should federal student loans and private student loans be consolidated together?

No, federal student loans have several advantages over private student loans: lower interest rates, tax-deductible interest, and the opportunity to extend your payment period up to 30 years through consolidation. In addition, there are situations in which your federal debt can be deferred, or even forgiven. If you consolidated the federal and private loans together you will lose the benefits of your federal loans.

Why should one consolidate debt?

To reduced monthly payments.
To reduced finance charges.
To put an end to creditor harassment.
To make a single monthly payment.
To get out of debt.
To pay off your debt faster.
To gain financial freedom.

What is the difference between unsecured debt and secured debt?

An unsecured debt relies only upon your promise to repay (and the promise of co-borrowers and/or co-signers as well) the debt. Common forms of secured loans are home loans (mortgage and equity line-of-credit) and car loans. Once default takes place, the creditor’s recourse is usually to foreclose on a home or repossess a vehicle.

What determines my credit score?

Your credit score is based on the answers to the following five questions:

1. Do you pay your bills on time? The answer to this question is very important. If you have paid bills late, have had an account referred to a collection agency, or have ever declared bankruptcy, this history will show up in your credit report.
2. What is your outstanding debt? Many scoring models compare the amount of debt you have and your credit limits. If the amount you owe is close to your credit limit, it is likely to have a negative effect on your score.
3. How long is your credit history? A short credit history may have a negative effect on your score, but a short history can be offset by other factors, such as timely payments and low balances.
4. Have you applied for new credit recently? If you have applied for too many new accounts recently, that may negatively affect your score. However, if you request a copy of your own credit report, or if creditors are monitoring your account or looking at credit reports to make prescreened credit offers, these inquiries about your credit history are not counted as applications for credit.
5. How many and what types of credit accounts do you have? Many credit-scoring models consider the number and type of credit accounts you have. A mix of installment loans and credit cards may improve your score. However, too many finance company accounts or credit cards might hurt your score.