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                   Glossary 
Debt terms, Settlement Program descriptions, Financial Services informaition 
- courtesy of
Debt Center USA

Unsecured Debt - credit cards, personal loans, medical bills, store cards, repossessions, and back rent. Secured debts such as car loans, home loans and secured lines of credit against mortgages are backed by collateral. Student loans & Tax debt need seperate assistance not provided by Debt Center USA.


Debt Settlement
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credit cards, personal loans, medical bills, store cards, repossessions, and back rent. Secured debts such

How does this compare with consumer credit counseling?

Why shouldn’t I just file for bankruptcy?

Shouldn't I try to get a loan?

Who is your ideal client?

What kind of Debt can be helped?

What is Unsecured Debt?

What is Secured Debt?

Can a Secured Debt become an Unsecured Debt?

Is there a minimum amount of debt I must have in order to work with Debt Center USA?

Does my debt have to be bad to be put into your program?

How do I qualify for the program?

How do I know if my case will be accepted?

How does the program work?

Will all of my creditors settle?

You negotiated a settlement for me, now what happens?

What if I do not have the money to pay the settlement?

Do I have to include all of my debts or can I select which ones I want to resolve?

How does this program affect my credit?

How will your program affect me when I file my taxes?

Why would a creditor want to settle on my account?

Do you pay my creditors?

What happens to my open accounts when they are put into the program?

How long will the program take and when will I be out of debt?

Will all of my debt be eliminated after I've finished your program?

Can my creditors continue to call me when I’m in the program?

Can my creditors sue me?

How do I know I will be able to make it through your program?

I own a home with equity. How can this be used to help with debt settlement?

What is your interest rate?

So what does the program cost and how do you get paid?

How much money can I save?

Will my information be kept private?

Will you answer my general debt questions even if I am not a client?

How do I get started?



What is Debt Reduction or Debt Settlement?

Many people and businesses have difficulties paying their debts on time. If you continuously pay just the monthly minimums, it will take a lifetime to pay off your debts. Or, maybe you are already behind on payments or cannot afford to stay current due to a financial hardship. We are licensed and trained debt arbitrators who will negotiate with your creditors on your behalf and can save you up to 40-60% of your debt. We do not represent your creditors. We help you to avoid a long life in debt or a costly bankruptcy and instead, get out of debt.

Is our Debt Reduction the same as debt consolidation?
No. With our personalized Debt Reduction program, we negotiate on your behalf to actually eliminate your debt. Furthermore, in Debt Reduction, the amount of money you owe, the principal, is actually reduced. Debt consolidation is just the consolidation of your individual debts into one debt. In debt consolidation, only the interest rate may be reduced. With debt consolidation, you need to obtain a new loan in order to pay off your existing debt. If you have too much debt and/or bad credit, it is unlikely that you would be approved for a consolidation loan.

How does this compare with consumer credit counseling?
Credit counseling has no effect on principal at all. In credit counseling you will pay the debt in full, hopefully at reduced interest rates. It also can be convenient if you have many bills to pay. One problem with consumer credit counseling is that the payments are still rather high and it typically takes 5 or 6 years to pay off the debt. These companies are also typically funded by your creditors - the very people to whom you owe money. In other words, they may not represent your best interests. There are many non-profit debt counseling centers but they generally work for creditors and continue to report to the credit bureaus. While in credit counseling, you pay your debts through the counseling company. You will stay current on payments and not damage your FICO score. However, you will receive a CC or Credit Counseling mark on your credit. This is viewed negatively by most lenders and may hinder your ability to refinance a home or get a loan.

Why shouldn’t I just file for bankruptcy?
Bankruptcy is designed to be the absolute last resort and you should seek the advice of a licensed attorney before filing. It will have an extremely negative and lingering affect on your credit report for 7-10 years. It may also have negative ramifications in other aspects of everyday life and carries with it a horrible stigma. You do not want to file for bankruptcy if it can be avoided. If you are working, are serious about resolving your debt, and have enough discretionary income to resolve your debt over time, we recommend that you try our free initial consultation to see if Debt Reduction is right for you.

Shouldn't I try to get a loan?
Why would you want to borrow more money at high interest rates? This may already be part of the problem and an additional loan will only compound matters. Can you even qualify? And if so, you may need to secure the loan with an asset - as risky venture. For other options fill out our free consultation form to see if Debt Reduction is right for you.

Who is your ideal client?
Our ideal client:

1. Has a debt problem he or she cannot resolve even though they have tried.
2. Is having trouble staying current, is delinquent on their accounts, is perhaps in collections, or is in or close to being in litigation.
3. Has a positive cash flow and can afford to pay some of the debt.
4. May be considering bankruptcy, but would like to avoid it.
5. Is not contesting the debt that is owed, just cannot pay it.
6. Has a minimum of $10,000 in unsecured debts.
7. Have had some type of hardship (divorce, illness, job loss, reduction in pay).

What kind of Debt can be helped?
Our program can accommodate most kinds of unsecured debt including but not limited to credit cards, personal loans, medical bills, store cards, repossessions, and back rent. We do not work with secured debt problems. Debt such as car loans, student loans, mortgages, or IRS tax liens are not included in the program.

What is Unsecured Debt?
Unsecured Debt generally arises from a contract you enter into with a creditor, which enables you to obtain goods or services on credit in exchange for your promise to pay the creditor back. This debt is not collateralized by property and commonly includes: credit cards, medical bills, commercial debt, personal loans, and consumer debt. If you fall behind on this type of debt, the lender’s recourse is to take legal action.

What is Secured Debt?
A Secured Debt is a loan where the creditor retains a security interest in an item of real or personal property such as a house or an automobile. If you fall behind on your payments on this type of debt, the lender can repossess collateral in order to mitigate their damages. You could remain liable for any deficiency balance owing after your property has been repossessed and sold. The laws regarding home mortgages vary from state to state and lenders’ rights generally depend on the terms of the mortgage and whether any other lenders have an interest in the Real Property.

Can a Secured Debt become an Unsecured Debt?
Yes. A secured debt may become an unsecured debt when the property securing the loan has already been repossessed and sold by the creditor. If the sale of the property still does not cover the contractual obligation or debt, a “deficiency balance” is now owed by the consumer. This deficiency balance becomes an unsecured debt. There are, however, certain exceptions.

Is there a minimum amount of debt I must to have in order to qualify?
Yes. We require that you have a minimum total of $10,000 of unsecured debt. We also require that any individual debt have a balance of at least $1,000.


Does my debt have to be bad to be put into your program?
No. Our program works for debt in all stages.

How do I qualify for the program?
Our Senior Debt Consultants offer a free consultation, which includes a detailed financial analysis to determine if an individual or business would benefit from the program. Our main focus is to insure that our program is a realistic solution to your particular situation. The last thing we want to do is put someone in a program that will only provide temporary relief. Our goal is to eliminate your debt as quickly and as cheaply as possible.

How do I know if my case will be accepted?
You will be advised after the free consultation whether or not we can help you. If you are in debt, serious about resolving your debt, and currently employed, chances are we can assist you. However, we certainly do not accept everyone into our program.

How does the program work?
Our objective is to reach a quick settlement with a creditor, attorney, or collection agency representing your creditor. You will make a single monthly payment each month into your own personal bank account at your bank of choice. As funds accumulate in the account, we negotiate settlements with your creditors, often enabling you to escape debt at a fraction of the total amount owed. Once a settlement is reached, you then pay the settlement directly to the creditor from your own account.

Will all of my creditors settle?
Debt Center USA looks at each client’s situation as being unique. We have established relationships with most creditors and know exactly which ones are willing to settle and typically at what percentage. Our Senior Debt Consultants tailor a program to your needs based on your budget. They will review the percentages we often see as settlement offers from your creditors and base their estimates on these. We will not accept into our program creditors that we cannot work with or situations that will hinder our ability to settle.

You negotiated a settlement for me; now what happens?
Once we reach a settlement, we will seek your approval. We will provide guidance on whether or not we believe you should accept the settlement offer. Once you approve it and your funds are confirmed, we will deliver to you the terms and conditions of the settlement. You then send payment directly to the creditor, typically electronically. The terms and conditions will specify how payment should be made. Once paid, you will not owe this creditor anything.

What if I do not have the money to pay the settlement?
We have many programs that work within your budget. You are in control of when and what gets settled. If you do not have the funds available for a settlement, then no settlement will be made. We will then, in turn, keep your creditor at bay until you have accumulated the funds. Sometimes a fantastic settlement offer is reached earlier than anticipated. In these instances, we highly recommend that you take advantage of the offer if at all possible. Always keep in mind that the purpose of our program is for you to get out of debt. You need to make a legitimate effort to eliminate your debt by following the plan we develop for you. We form a partnership to help solve your financial situation. Your debt will not disappear and we cannot settle the accounts without an effort on your part.

Do I have to include all of my debts or can I select which ones I want to resolve?
You can select which debts you would like us to resolve. We may recommend that you include all or most of your unsecured debt, but this will be discussed during your free initial consultation. It is very important that you tell our consultants about other unsecured debt you may have. It may hinder our ability to negotiate if you are making regular payments to a creditor that is not included in our program, while not paying the creditors in the program.

How does this program affect my credit?
It is important to first point out that we do not report to the credit bureaus. However, your creditors may report that you are participating in a debt management program. Clients will most likely experience an adverse affect on their credit if their debts are current with no history of late payments. No form of debt reduction will have a positive effect on your credit. In debt settlement, you will receive an ‘open delinquency’ on your credit as regular payments are not made to your creditors. However, once we negotiate a settlement, you will pay the creditor directly yourself, and the late marks will stop. Your credit will then show ‘settled in full’. Our program will certainly improve your debt to income ratio by eliminating debt. This ratio is a criteria used by lenders to evaluate your credit worthiness. Since your outstanding debt is being resolved by way of settlement, future creditors will see that you have made a concerted effort to resolve your debt instead of filing bankruptcy. Remember, our program is a bankruptcy prevention service so credit should be a secondary concern. Our goal is not to improve your credit, but to get you out of debt as quickly as possible while avoiding bankruptcy.

How will your program affect me when I file my taxes?
Debt settlements should be recorded on your tax filing. If a debt is canceled or forgiven, other than as a gift or bequest, the debtor generally must include the canceled amount in gross income for tax purposes. Your creditors may or may not report this to the government. It is considered forgiven debt and taxed at your normal rate. If you have three debts and each is settled in a different year, then you would only owe taxes in the year in which each individual settlement occurs. Example: You owe Creditor A $10,000 and we settle it for $4,000. You have saved $6,000. Your tax rate is 25%. You would owe $1,500 in taxes (25% of the $6,000). Even with the taxes, you are still saving $4,500 in this example. Depending on your financial situation, you may be able to claim insolvency and would not owe these taxes. For more information visit this page on the IRS site or contact your local accountant.

Why would a creditor want to settle on a my account?
Creditors know that approximately 30% of the 1.2 million bankruptcies in 2008 occurred on debt that was current. If you were to file bankruptcy, the creditor would receive nothing. It also costs creditors time and money to hire outside attorneys or collections agencies to recover delinquent debt. Many people are surviving by borrowing from one creditor to pay another. Eventually they run out of available credit lines and find themselves unable to make the payments. Our program is designed to allow up to 36 months for the debt to be settled, so we can afford to wait until the creditor makes the sensible decision to settle.

Do you pay my creditors?
Debt Center USA does NOT disburse funds to your creditors during the program. We are not a credit counseling program. The purpose of our debt reduction program is to settle your debts at a discount to the principal balance owing. While in our program, regular payments are not made to your creditors. We are not able to negotiate meaningful settlements on current accounts. If you can afford to keep paying off your debts on your own, you should do so. Once you approve a negotiated settlement offer, you will then make settlement payments directly to your creditors from your settlement account. The settlement account is an account that you control at your bank of choice. Once the payment has been made the account will now be considered settled in full.

What happens to my open accounts when they are put into the program?
Any account that is put into our program is automatically closed to future use. Creditors normally require accounts included in debt management programs to be closed in order for them to extend special terms like substantial lump sum reductions, lower monthly payments or lower interest rates. This is to stop the cycle of charging and eventually eliminate your debt. We may recommend that you maintain one minimum balance credit card to use for emergency purposes while you are in the program.

How long will the program take and when will I be out of debt?
The length of time necessary for completion of the program varies from case to case and will depend on you having the funds available to resolve your debt. Our Senior Debt Consultants will discuss this with you during your free consultation and assist you in forecasting how long it will take to eliminate your debts. Depending on the monthly payment you decide upon, the debt can be eliminated as soon as you can come up with the necessary funds. It could be as soon as 120 days. A typical program, however, takes 12-36 months. You are in charge of what you can manage and afford and it ultimately depends on how much you owe, your available monthly income, and how much you can pay to your creditors in a lump sum.

Will all of my debt be eliminated after I've finished your program?
If you follow all of our procedures, you can expect to be free of all contracted unsecured debt (that you have reported to us) at the conclusion of our program.

Can my creditors continue to call me when I’m in the program?
Yes they can, but most will not. The majority of first party creditors are cooperative and will update your records to indicate that you are participating in a debt management plan. Our program includes representation by our in-house legal department. We send cease and desist letters to creditors. This compels third-party creditors or collection agencies to only communicate with us. However, you may still have to put up with calls for 30 to 60 days while the program is being set up as the amount of time it takes for their records to update varies by creditor. Usually, the calls will cease after the creditor receives notice from us that you have entered our program. Your Senior Debt Consultant will explain how various creditors are handled. Be aware that despite our best efforts, there are unscrupulous collection agencies that will not abide by a cease and desist letter and will continue to call you. This is against the law and you can formally complain should this continue. You should also know that accounts are frequently sold. We may prevent one collection agency from contacting you. However, they may sell your account to a new agency and the process will unfortunately have to be repeated.

Can my creditors sue me?
Creditors maintain the right to use legal means to collect a debt. Some creditors are more litigious than others. However, most creditors will only sue if there is a lack of communication or they feel that a consumer can afford to pay them and is simply trying to ‘beat the system.’ If you are earning six figures, own a home with equity, or can afford to pay off your debts in full, then you may be sued if you fall behind on payments. Lawsuits are not common but they do happen. You should be aware that a creditor can only sue you if it retains an attorney that is in your state. Furthermore, it takes time and costs money to file. Lastly, even if a creditor is to take legal action, they can only collect what you have. A garnishment takes time and always hinges on your employment. If you lose your job, the garnishment will temporarily cease. It is not easy for a creditor to attach to equity in your home and it may be protected by your state’s homestead act. In summary, it is usually more cost effective for a creditor to settle than to pursue legal action.
If a creditor takes legal action we have experience in negotiating and settling debt during the entire legal process. However, we are not lawyers and cannot provide you legal advice. We recommend that our clients seek competent legal counsel in certain situations and may recommend an outside firm in some instances. Our trained negotiators have settled accounts for clients who have had a summons, judgments/liens and wage garnishments before entering the program. We work with your creditors to find a solution that will satisfy everyone before legal action is taken. While we cannot guarantee that legal action will not be taken, we are confident that our experience in dealing with creditors can avoid it.

How do I know I will be able to make it through your program?
During your free consultation, we carefully review your situation to determine what program is right for you. You decide how much you can afford to pay each month and what resources you have available. Our program is a partnership. Your success in this program depends on your ability to set aside the prescribed funds and to keep an open line of communication with us. If you can follow these guidelines we know you will succeed in our debt reduction program.

I own a home with equity. How can this be used to help with debt settlement?
If you have available equity in your home we may be able to help you use this as a means to gather money for settlement more quickly. We have affiliations with several mortgage companies that are experienced in working with debt settlement companies. They are often able to help people who normally may not be able to secure loans to refinance with a cash-out. This money can be used to pay off creditors after we negotiate a settlement for you.

What is your interest rate?
We are not a loan company, so we do not charge interest.

So what does the program cost and how do you get paid?
Our fee is among the lowest in the industry and is based on a percentage of your overall debt. We earn our Fees as follows: Thirty percent (30%) of the total fees are earned when we perform budget review, debt analysis and file setup. Thirty percent (30%) of the total service fees are earned when we have prepared initial correspondence to the contracted creditors. Thirty percent (30%) of the total fee is earned when we have received notification from you to begin settlement of the contracted accounts. The final ten percent (10%) of the service fee is earned when you complete the program. If for any reason, you fail to complete the program, you shall be entitled to a reimbursement of all unearned fees. Our program is very affordable and far less expensive than costly legal fees or attorneys which may charge hundreds of dollars per hour. We receive our fees through an electronic funds transfer from whichever bank account you want to use.

How much money can I save?
In extreme cases, as much as 80% of the principal balance can be eliminated, but on average creditors will settle for $.40 to $.60 for every dollar owed. Factors that influence this include: who the creditor is, your situation, whether you have a balance transfer or cash advance, and how quickly you can come up with settlement funds.

Will my information be kept private?
We are 100% committed to maintaining complete confidentiality and privacy. Feel free to read our comprehensive privacy policy found on this site. Of course, your creditors will be advised by us that you have contracted our firm to assist you.

Will you answer my general debt questions even if I am not a client?
Absolutely, we welcome the opportunity. Often we answer questions about debts, credit reports, taxes, income and other topics on a daily basis. If we do not have the answer, we can refer you to someone who does. Remember, however, that we are specialists in debt reduction. For tax advice, you should contact an accountant. For legal advice, contact an attorney.

How do I get started?
There are several ways to begin. The simplest is for you to accurately fill out our simple "Free Consultation" form found on this web site. We will review it promptly and get back to you. For immediate attention, contact us toll free at 310-909-8811 and we will be happy to answer any of your questions. There is no risk, cost, or obligation to receive your Free Debt Consultation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Debt Center USA
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Debt Center USA
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