What Effect Will This Have on my Credit Scores?
Yes, debt settlement does have a negative effect on credit scores, but the type of credit card debt most qualified candidates are carrying has already created a negative credit score. Debt Settlement can decrease your FICO score 100-120 points or more. However, debt relief is the goal, not maintenance of FICO scores. Once clients are debt free - coupled with elementary efforts to open new trade lines and follow best financial practices - they can effectively rebuild credit scores over a 12-48 month period once they complete the debt settlement process. The FICO score is often compared to a snapshot of ones financial life and it is not etched in stone; it is fluid meaning it can change for the positive once one gets out of debt. Debt settlement is a very aggressive program but it is also very cost effective. The goal is not just to get out of debt but to achieve financial stability partly by not wasting time and money trying to get out of debt in a system of compound interest that is designed to make the feat nearly impossible. If someone is only making minimum payments and every month is a struggle as their overall debt amount is not getting smaller, the sooner they realize and accept the reality of their situation, get pro active, and make the decision to get out of debt, the better.
I Have Too Much Debt, What Can I Do?
You have four basic options. You can do nothing, you can attempt to settle the debts with your creditors, you can engage in debt management (sometimes referred to as credit counseling) or you can file bankruptcy.
Fees?
Litigation attorneys regularly charge up to 33% fees for winning a case through a plaintiff settling or motion practice, and 40-50% fees (depending on the state) for winning a case in court. Our service consists of the same negotiation process required for motion practice in litigation cases, and yet we only charge a fraction of the fees. Why pay a debt settlement company that isn’t a law firm on top of the fees from the law firm they work with when you can have a real law firm such as Bay View Law Group represent your debt settlement case for the same cost if not less?
Customer Service?
Bay View Law Group is a prestigious law firm that prides itself not only on representing all of our clients throughout the entirety of the debt settlement process or referring them to a program better suited to their circumstances, but also on our friendly well-informed customer service. We are bound to zealously represent all clients by rules of the State Bar for each state in which we offer our service.
Dropout Rates?
Debt settlement companies that are not law firms often take on cases that have no chance of debt negotiation success and clients will not enjoy the added confidence of having an attorney on their side. A few debt settlement companies take clients’ money and do nothing, which gives the overall industry a bad name; bad news is always over-reported while successes go quietly overshadowed. As a law firm we are bound to represent our clients to the best of our ability, therefore our drop-out rate is exceedingly low compared to non-law firm debt settlement companies. But potential consumers also need to understand that this program requires a commitment and our clients need to partner with us and trust our recommendations. One cannot expect overnight results or believe everything the credit card company collectors are saying to them. Consumers need to understand that the debt negotiation process is long and depends on multiple factors, including the accumulation of funds in our client’s escrow accounts. Most importantly, our client's simply need to just call us when fearful or confused so we can work together to achieve our set goals. The program does not fail but sometimes people do.
The very best way to insure yourself of a companies credibility regarding someone who represents themselves as an attorney in any state is to begin your due diligence search at that states' State Bar Association. Our managing attorney, Jedediah N. Thurkettle, is proud of his record and can be found on the State Bar of California website www.calbar.org, using the Attorney Search function.
Lawsuits?
Lawsuits are always a possibility. Creditors are assured of that right when they are owed money in order to seek repayment. However, our firm knows how to keep lawsuits to a minimum through debt negotiation, both before and after a summons might be issued. Litigation is costly and risky for both parties, our goal is always to settle them prior to a court date.
Tax Consequences?
The IRS sees forgiveness of credit card debt as taxable income. However, speak with a tax professional as they will advise of whether or not one may be able to show partial insolvency by comparing the fair market value of all their assets versus what is owed on them via an IRS Form 982. Because of the massive drop in property prices, cars, collectibles, and other household goods on the market, one may be insolvent in an amount great enough to escape or greatly lessen any tax liability. Once again consult a tax professional, and one might or might not need to pay taxes, but either way they will save money over paying the full debt amount with interest and fees.
Debt Settlement Is Prohibited In Certain States?
Sure, debt settlement companies - much like many other products and services - are prohibited in certain states, but Bay View Law Group is not a debt settlement company, we are a law firm. Certain types of refinance mortgages and credit card interest rates are also illegal in certain states as each state law is different. That does not mean the process of debt settlement is bad. Debt settlement is a business tool that is centuries old in practice.
Consumers Feel Like They Can Deal With Credit Card Companies Themselves?
Credit card companies are in business for one reason: to make money; not to help people. Consumers can usually only communicate with one branch of their creditors: the in-house collections department. We work with the Loss Mitigation Department, which in many cases the public is not allowed to speak with. Loss Mitigation is the department that oversees short sales in real estate, as well as debt settlement of unsecured debt.
Consumer's Situation?
Potential clients of Bay View Law Group need to think about their situation mathematically, not emotionally. One must sit down and add up everything they owe, find out exactly how much they pay every month, how much of the principle is being paid off in each payment, as well as how much interest they are paying; all of which we do with our clients. Most people who go through this process are shocked by how inaccurate their math has been regarding their overall debt amount. Then review how much money is left after bills every month. If a consumer has a comfortable sized savings account covering at least 6 months of monthly expenses and they are easily paying down debts, then they are not in trouble. However, if a consumer is making only the minimum payments and they do not feel financially comfortable due to debt, this is not a time for self deception. The first step is to admit one is in trouble, not let it be a negative reflection on personal self worth, and take the necessary steps to correct the issue.
Want To Deal With Someone Face-To-Face?
Meeting face to face with any company is no guarantee of credibility. Do you deal with your credit card companies face to face? Of course not, because they are domiciled in South Dakota, Texas, North Carolina, or locations often many miles from your location. We negotiate all over the country. Requiring that every transaction be face to face is impossible
How Do Consumers Know Which Company To Go With?
Forget “debt settlement companies” and find a law firm that you are comfortable with. Debt settlement requires legal representation, not the advice of a sales organization. Cut to the chase and hire a law firm because they are bound by bar ethics rules to represent you fully, zealously, and ethically. Bay View Law Group has put into place all of the necessary components to reach successful settlements for our clients. We have customer service representatives our clients can call and as a law firm our credibility is built into our business model. Our lead attorneys have decades of experience in bankruptcy and debt settlement matters and our firm will work hard to help you achieve debt relief.
If I do nothing, will my problems go away?
Doing nothing is not an option for most people. In some cases when your income is considered "untouchable" and you have no assets then, with few exceptions, you are considered “judgment-proof.” That is, even if your creditors get a judgment against you, they will not be able to garnish your wages (all your income is protected) and they will not be able to file a lien on your property (you have no property subject to a lien).
But what if I do earn a regular paycheck and have some assets, can I still do nothing?
You can elect to do nothing if you choose, though it will eventually catch up with you. Creditors will obtain legal judgments against you and they can begin garnishing your wages and putting liens against any property you might own. If you have property that can be obtained by creditors, taking definitive action is in your best interest.
Okay, I want to do something about all this debt, but I can’t afford to even pay off the interest every month. What can I do?
Depending on your financial situation, it may be in your best interest to just pay the whole debt off, but at a reduced interest rate and over an extended period of time. This is what’s called “Debt Management.” Our experienced debt negotiators work with your creditors to work out a payment plan that will eventually satisfy the entirety of the debt.
I really can’t afford to pay off the entire debt, are there any alternatives?
The two most readily available alternatives are debt settlement and bankruptcy.
How is debt settlement different from credit counseling?
With debt management or credit counseling (same concept), you are paying off the entire debt over an extended period of time but at a lower interest rate. With debt settlement, an experienced debt negotiator attempts to lower the amount owed to the creditor so that you can pay it off all at once. With debt settlement, you save up as much money as you can and then your negotiator offers that amount to your creditor in hopes that the creditor will eliminate the entire debt for that amount.
How much is my debt reduced through debt settlement?
There are literally dozens of factors that will influence how much your debt can be reduced or even whether or not creditors will settle in the first place. How much you owe, how long since you’ve last made a payment, how much you earn, who the creditor is, how the creditor is doing financially at that time, etc. Because these factors can change day-to-day, it’s impossible to make any guarantees regarding how much debt can be settled. Don’t be fooled by any company that makes guarantees regarding how much your debt can be reduced.
What if I can’t afford to pay my debts through credit counseling or even save anything for debt settlement, what can I do?
You should explore the option of filing bankruptcy.
What does it mean to be bankrupt?
Bankrupt is a legal term used to describe someone who is legally insolvent. In more casual language, it means you are unable to pay your debts as they become due. Upon a voluntary petition (or, less frequently, a petition by creditors), you can ask a court to find that you are legally insolvent and be protected from creditors.
Are all bankruptcies the same?
There are six chapters of the bankruptcy code, located in Title 11 of the United States Code. For the vast majority of consumers, only two chapters are important to understand – Chapter 7 and Chapter 13.
What is a Chapter 7 bankruptcy?
Chapter 7 is a “liquidation” bankruptcy. If you qualify under Chapter 7, an appointed Trustee will liquidate, or sell off, all of your non-exempt assets. The money made from the sale of those assets is used to pay creditors off. The sale and payment to creditors will satisfy the entirety of your debt regardless of how much the creditors actually receive. If you have no applicable assets to sell, then there will be little or no money at all going to the creditors and it still discharges all of your debt.
Does a Chapter 7 mean the Trustee will take everything?
Chapter 7 liquidation does not mean the trustee will take everything and sell it. For instance, you are allowed to exempt your home, some personal property, some insurance benefits, and most of your wages. One way to think about it is if you depend on it to live, you can probably exempt all or at least a significant portion of it.
How is a Chapter 13 different from a Chapter 7?
Chapter 13 can be thought of as more of a reorganization of debt rather than a total discharge. Under Chapter 13, you propose a plan to pay your creditors over a 3 to 5 year period. Generally, you will be required to pay as much as you can afford each month. That is, you figure out your monthly income, you subtract your reasonable monthly expenses and the difference is what you have to pay to the trustee. One of the biggest advantages of filing under Chapter 13 is that you get to keep all of your property. However, you are obligated to make timely payments over the 3 or 5 year period.
I heard it’s nearly impossible to file bankruptcy these days, is that true?
No. Although the new 2005 law made the bankruptcy code stricter regarding Chapter 7 bankruptcies, it is not impossible. Chapter 13 bankruptcies were not affected in any significant way.
How do I know if I qualify for Chapter 7 under the new law?
Basically, the 2005 law requires application of a “means test” to all Chapter 7 petitions for bankruptcy. In this case, “means” is your ability to make some kind of payment to your creditors. A common determining factor for whether or not you will qualify for Chapter 7 is whether your income falls above or below the state average income. The average income is determined by family size. A bankruptcy attorney can help you determine if you qualify.
Since there are so many options, what’s the best choice for me?
Because there are so many factors that can influence which choice is best, it’s a good idea to consult an established professional in the field of consumer rights. Also, because new companies are springing up every day that claim to be experts, you should be careful who you consult with regarding your rights. It is advisable that you consult with a law firm rather than a “debt-settlement company” in order to be fully informed and fully represented.
