Debt Settlement eBook

8/6/2019 Debt Settlement eBook

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This manual was written with the intention of providing information regarding the subject

matter contained herein. However, the author and publisher are not engaged in

rendering accounting, legal, investment, or tax advice or services through this or any

other publication. If legal or other expert services are required, the services of a

competent professional should be sought. All information here is not to be construed as

legal advice, it is not. This manual was designed to give correct and helpful information,

but there may be typographical errors and mistakes in content. Care should be taken to

use this manual as a general guide to the information contained herein and not as the

ultimate source of this type of information, In addition, the information in this manual is

up-to-date only up to the date of publication. Many of the items in this manual will not be

exactly as described as time goes on. The publisher and author of this manual shall not

have liability responsibility to any person or other legal entity in regard to any loss or

damage caused or alleged to be caused either directly or indirectly by the information or

the use of the information contained in this book.



Debt settlement or debt negotiation is a means for resolving debt obligations through

partial payment to a creditor. A creditor may be willing to accept a portion of the debt to

satisfy the obligation. Sometimes the costs of pursuing a judgment are so high that the

creditor would rather accept a reduced payoff in order to clear the account. Creditors

lend money with the intention of getting it back. They always try to recover default or

charged-off loans in some way or other. Settlement is definitely an attractive offer and

this helps creditors get their money repaid without spending funds for collection.

Typically people in need of Debt Settlement are people who have suffered some type of

financial hardship. This can range from job loss or divorce to medical issues. Debt

Settlement is for people who are deep in debt and are without the means to repay their

creditors. These types of people should be the only ones to use Debt Settlement. Debt

Settlement should not be used by someone who is simply trying to escape their financial

obligations. That is the reason most credit card companies and other lenders show

interest in the debt negotiation process. They can reduce the debts by 40%-60% of the

debt balance.

Debt settlement can be done by you or a debt settlement service company. If you use a

third party to settle your debt they will charge you a fee. The fee can vary depending on



each company. It could be 12%-15% of the total debt or up to 30% of the total amount

they save you plus they might have a monthly service fee ranging from $10-$35.

When is the right time to settle your debts?

It is very important to take the right decision at the right time; otherwise you might not

have the full benefit of the program.

One month delinquent: When you are just one month behind with your payment, your

creditor might agree to reduce 70% - 75% of the total debt amount. Since much late

fees and financial charges have not been added to the principal amount by this time,

settling at this stage could be the best decision.

Six months delinquent: Though your creditor might accept a 50% settlement offer at

this stage, it does not mean that you end up paying lesser amount if you settle lately.

Since you have missed six consecutive payments, you have already accumulated lots

of late fees and other financial charges. As a result, the principal debt amount is quite

high by this time.

Charged-off account: If the account is charged-off, it is likely that your creditor would

sell the account to a debt buyer. Dealing with these debt buyers is a nightmare. They





Following accounts cannot be included in debt settlement:

Auto Loans

Mortgages

Tax Liens

Child Support

First Steps to Settle Your Debts:

In order to settle, you must first be able to make an upfront payment of 35-65% of the

existing debt balance with one of your collectors. You can do this by making a monthly

transfer into a savings account until you reach a potential settlement amount. You may

also find other ways to come up with the money, such as:

Selling your property

Refinance your home

Using a tax refund

Using 401K, IRA, Stocks, or Bonds

Selling your vehicle or exchanging expensive car with less expensive car to save money

Selling valuable items through online auctions



Borrow money from friend or relative

Get money from websites like www.prosper.com etc.

Second step is presenting your proposal or offer:

Creditors are going to do take every step to collect money that you owe them. You need

to show the creditor that it’s the hardship that you are going through and show them that

it’s in their best interest to settle for less than the full balance to avoid filing for

bankruptcy. If you lost your job or have some kind of other hardship, let the creditor

know. Before the creditor is going to forgive thousands of dollars, they need to be

convinced. A settlement should be in writing. It should spell out the major provisions of

your agreement. Never send in payment based on a verbal promise!

To sell your side of the story, you must present the personal side of the situation and

may offer the following:

The contract should clearly state identifying information, including the collector name

and address, debtor name and address, date of the agreement, purpose of the contract

(debt settlement) and the account information (account number, account balance,

original creditor).

Mention the total amount of debt owed with all creditors.

http://www.prosper.com/

http://www.prosper.com/



An agreed settlement amount should be stated, and it should also include a clause

whereby payment of the settled amount would be deemed to fully indemnify the debtor

from any future claims by any claimant regarding the debt.

Explain assets have been liquated, or how the source of funds has been arranged.

Some savvy debtors also get agreement that the collector will remove any negative

information from all credit bureaus regarding the debt. Credit bureaus disapprove of this

process, but it is still allowed. In most cases, the original creditor would still show

negative information.

Another common clause is a statement summarizing that while you do not acknowledge

the validity of the debt, you would like to close the issue.

Show an urgency issue by stating that funds are depleting rapidly.

Include a financial statement showing your monthly expenses.

Include documents regarding your hardship. Such as:

Current medical bills

Letter from doctor diagnosing your present condition

Disability statement if applicable

Personal assets and liability statement showing that you are overextended to the point

of bankruptcy and list assets you will sell to get funds to settle the debt

Letter from attorney showing that you are in the process of possibly filing for bankruptcy



Letter from other creditors that they have already settled or are willing to settle their

debts

Current credit report showing that you are severely delinquent

By presenting these elements properly and showing an honest scenario that make

sense to the creditors to justify the offer, it can result in a resolution to forgive a

percentage of your debt.

Keep in mind that when you negotiate your own settlement, you are taking on

responsibilities that might otherwise be handled by a settlement company or attorney. It

is usually well worth it to settle on your own rather than using these expensive

representatives. However, you should educate yourself to make sure that you cover all

possibilities so that you are protected from additional legal action.

Step Three is Offer Gets Declined or Accepted:

If your offer is declined you don’t need to be discouraged. You have to keep in mind that

you are negotiating with the creditors. The process of negotiation takes time. If your

offer was declined the first time then you need to schedule a follow up in 30 to 60 days.

You can send a new settlement offer with a little higher amount than the previous offer.

The creditor will eventually accept the offer because the rather have something than

noting. They know if the client files for bankruptcy they will get nothing. So be patient.



If your offer is accepted make sure that you request a written settlement acceptance

letter. You can have it send to you via mail or faxed. After you receive the settlement

acceptance letter then only you should make payment to the creditor via check or credit

card. This will satisfy their account in full.



How long negative items stay on the credit report

Good credit - 10 years or longer.

Negative credit (late payments, collections, charge-offs, closed accounts, child

supports, civil and small claim judgments, paid tax liens) - 7 years.

Chapter 7, 11 and 12 Bankruptcy - 10 years

Chapter 13 Bankruptcy - 7 years

Unpaid tax liens - 10 years

Inquiries - 2 years



ASSETS/LIABILITIES/INCOME

WORKSHEET

Name: ______________________________________ Date: ____________

ASSETS JOINT CHILDREN

house (current value) Purchase year: _______

other properties

savings accounts (personal)

checking accounts (personal)

stocks/bonds/etc. (not retirement)

retirement plans

non-term life insurance (cash surrender value)

automobiles (blue book wholesale value)boats, motorcycles

business

business banking accounts

other:

TOTAL ASSETS:

LIABILITIES

mortgage

home equity loan

auto loan

credit cards

other loans ___________________________

TOTAL LIABILITIES

INCOME SOURCES (annually)

TOTAL INCOME

On the back of this sheet, please write each bank name (etc.), account name, account number, balance, date of

balance.



(C) checking

(S) savings

(M) money market Whose? Bank name Account # Balance Date

____ __________ _____________ _________________ ____________ ___________

____ __________ _____________ _________________ ____________ ___________

____ __________ _____________ _________________ ____________ ___________

____ __________ _____________ _________________ ____________ _______________ __________ _____________ _________________ ____________ ___________

____ __________ _____________ _________________ ____________ ___________

(V) Visa

(M) Mastercard

(A) American Express Whose? Account # Balance Date

____ __________ _________________ ____________ ___________

____ __________ _________________ ____________ ___________

____ __________ _________________ ____________ ___________

____ __________ _________________ ____________ ___________

____ __________ _________________ ____________ ___________

____ __________ _________________ ____________ ___________

____ __________ _________________ ____________ ___________

Investment and Retirement Accounts:

IRA, 401(k), DateWhat Whose? pension? Started Account # Value As of Date

__________________ _______ __________ __________ _________________ __________ _________

__________________ _______ __________ __________ _________________ __________ _________

__________________ _______ __________ __________ _________________ __________ _________

__________________ _______ __________ __________ _________________ __________ _________

__________________ _______ __________ __________ _________________ __________ _________

__________________ _______ __________ __________ _________________ __________ _________

__________________ _______ __________ __________ _________________ __________ _________

Other:



Sample Debt Settlement Offer Letter

Your Name

Your Address

Your Phone number

Date

Creditor Name

Creditor Address

RE: Collections Letter dated __________on Account #_________________

Dear Sirs,

I realize I have become seriously delinquent on this account. Due to (hardship--------------------), I

have been unable to make payments on my account with you. In light of this dilemma, I have

liquidated (type of asset, e.g.401K,Car,house etc) in hopes of avoiding bankruptcy. In order to

save both of us time and expense, I would like to make arrangements to settle this account.

The last statement that I received from your organization dated ________ showed a balance

due of ____________, I have allocated a lump sum of $(_________) which I will be able to send

you a Cashier’s Check within 5 days of receiving the written agreement from your organization.

In accepting this settlement offer, your organization agrees to:Report debt as Paid as Agreed, Closed by Consumer

Accept _________ as payment in full for the account.

I agree to:

Send Cashier’s Check in the amount of _________ within 5 days after receiving the written

acceptance of this offer.

If you wish to discuss this further, I can be reached by phone at ______________ between the

hours of _______________________. However, please understand that I will make no

payments until I receive written confirmation that you accept my offer.

Best Regards,

(Your name)



Sample Letter to Stop Debt Collection Harassing Calls

YOUR NAME

YOUR ADDRESS

CITY, STATE, ZIP CODE

Today's Date

Place collector's name here

Collectors address

Collectors city, state, zip

RE: Acct.#

Dear (place collector's name here):

This will serve as your legal notice under federal law, The Fair Debt Collection Act, to cease all

communication with me in reference to the above account.

If you fail to head this notice, I will file a formal complaint against you with the Federal Trade

Commission who is responsible for enforcement, and the American Collectors Association, andthe State Attorney General's Office.

I have decided that we do not desire to work with a collection agency under any circumstance.

We will contact (whomever the original creditor is) to resolve this matter directly.

You are also notified that if any adverse items are placed against my credit report as a result of

this notice, I will be forced to take appropriate action against you, and concerned parties.

Give this matter the attention it deserves.

Yours Truly,

Your signature



SAMPLE LETTER (to stop communications from debt collectors, dispute the debt, notify creditor ofexempt income). You can use any or all of the three paragraphs in the sample letter.

© MFY Legal Services, Inc. 2006. All Rights Reser SAMPLE LETTER (to stop communications from debt collectors)

Your NameYour Street Address

City, State, Zip

Today’s Date

Name of Debt Collection AgencyStreet AddressCity, State, Zip

CERTIFIED MAIL – RETURN RECEIPT REQUESTED

Re: Account No. (your account number here)

To Whom It May Concern:

I am writing to formally request that you stop all communications to me regarding this debt. The FairDebt Collection Practices Act, 15 U.S.C. § 1692c, requires that you honor this request. Moreover,under New York City Law, it is against the law for you to call and speak with me about a debt morethan twice in a seven day period. N.Y.C. Admin. Code § 5-77.

I am writing to request that you verify the above debt as required by the Fair Debt Collection PracticesAct. 15 U.S.C. § 1692g. I dispute that I owe this debt. Please send such verification to me at theabove address.

Moreover, my only source of income is exempt from collection. I have no income or assets that can belawfully collected for an enforceable claim or debt. This letter serves as notice of the fact that I do nothave any assets or income that are subject to collection under the law. In the event this debt is sold,this letter shall be included in my file to ensure that the buyer is put on notice of the same. If you or

any subsequent holder of this debt attempts to attach exempt funds in order to collect this debt, youwill be subject to wrongful attachment litigation.

Thank you for your time and attention to this matter. Your cooperation will be appreciated.

Sincerely,

Sign Your Name Here

Documents

Debt Settlement eBook