Frequently Asked Questions
WHAT IS DEBT SETTLEMENT?
Debt Settlement, also known as credit card debt negotiation, is considered to be the fastest and least expensive method to get out of unsecured debt problems. It is an aggressive approach to reducing debt and is best suited to Christians who have been under severe financial strain and are exploring bankruptcy as a possible alternative.
Debt settlement, by definition, is a negotiation process whereby the debt settlement company approaches your creditors with “offers” that are significantly less than the balance you owe. The creditors review these reduced offers and an agreement is reached that allows you, the debtor, to payoff the current balance for “less than” the actual amount owed. This “negotiating down” of the current balance is the source of the commonly used term, credit card debt negotiation.
HOW DO I KNOW IF DEBT SETTLEMENT IS RIGHT FOR ME?
If you have at least $10,000 in unsecured debts that need to be resolved, debt settlement may be an option you should seriously consider. The program designs are individualized to take your financial situation into account. The goal is to reduce the extreme financial pressure you have been under while still resolving your credit card debt problem quickly. If you find yourself struggling every month to meet even your monthly minimum payment obligations to your creditors, or you have been late on payments, and are now incurring high interest rate charges, this is a viable option you should add to your list of debt reduction solutions.
WHAT TYPES OF DEBTS ARE ACCEPTED BY DEBT SETTLEMENT SERVICES?
Debt settlement programs accept not only credit card debt and department store cards, but they will also include collection accounts, medical/hospital bills, auto repossessions, and unsecured bank loans.
IS IT MORAL AND ETHICAL FOR CHRISTIANS TO ENROLL IN DEBT SETTLEMENT PROGRAMS?
Yes, debt settlement is both a legal and a moral way Christians often seek debt relief. Creditors are willing to “settle” the balance of a debt if they realize the debtor is in severe hardship and is facing the possibility of bankruptcy as the only solution to their debt problems. The creditors willingly participate in the negotiation process in determining the amount they believe to be a “fair offer” on the total balance due.
ARE DEBT SETTLEMENT COMPANIES "FOR PROFIT" OR "NON PROFIT" ORGANIZATIONS?
Debt settlement firms are “for profit” companies that are independent and not affiliated with your creditors. They do charge fees for performing their negotiation services and maintaining contact with your creditors, although the fee structures will differ by company. Credit card debt negotiation firms will often finance their fees over a period of time. They realize that individuals seeking out their debt relief services are having financial difficulties.
HOW LONG DOES IT TAKE TO COMPLETE A DEBT SETTLEMENT PROGRAM TO ELIMINATE MY DEBT?
The length of time it takes to complete a debt settlement program is almost solely determined by the amount of discretionary cash that the individual(s) can set aside and accumulate for the “lump sum negotiation process”. Most programs are anywhere from 12-42 months in duration. Consumers do like the flexibility that a debt settlement program offers in the way it allows them to set aside a predetermined “goal or targeted” amount for future creditor settlements. If one month, expenses in the household are high, they can set aside a slightly lower amount than their targeted plan, and catch up the following month. They can also use any lump sum cash they receive during the year (i.e. bonuses, tax refund) to speed up the process by setting those monies aside for creditor settlements.
IF CREDIT CARD DEBT SETTLEMENT IS NOT DEBT CONSOLIDATION, WILL I HAVE TO MAKE MORE THAN ONE MONTHLY PAYMENT EACH MONTH?
No, debt settlement programs are designed to require just one monthly payment.
WHAT IS THE DIFFERENCE BETWEEN CREDIT CARD DEBT SETTLEMENT AND CREDIT COUNSELING?
In a credit card debt settlement program, negotiators work on your behalf to reduce your overall creditor balances through the negotiation process. When you are enrolled in a credit counseling program, often called credit card consolidation, the counselors work on your behalf to reduce the interest rates with your creditors. The average credit card debt settlement program lasts between 1 and 3 years, whereas credit counseling services are designed to take between 4 and 6 years to complete their program.
CAN I GET A HOME EQUITY LOAN TO FUND MY CREDIT CARD DEBT SETTLEMENT PROGRAM?
Yes, this is encouraged if at all possible. In the case where you can secure a home equity loan or refinance your home with some “cash out” becoming available, a debt settlement company will negotiate your balances with your credit card companies. Once your creditors agree to a settlement for less than the balance owed, you may use the funds from the 2nd mortgage or refinancing to “settle” all your credit card debts. This process may take as little as 2 to 3 months to complete.
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