For more information on the FDCPA and other money matters visit www.ftc.gov/moneymatters.

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If you’re at a point where you realize you need help with your financial situation, then you should already understand that using any forms of credit is doing nothing for you besides digging a deeper hole of debt. Not only do you need to realize that you will be further in debt than you already are but the consequences that lie behind your actions. 

How would a creditor take this? Your creditors have access to pull and review your credit report, and how would it look if they saw that you have been opening new lines of credit or see that you have the ability to make monthly payments to other creditors. Because of the appearance of bad-faith on your part in the eyes of your creditors to which you are delinquent, it is likely to keep you from receiving debt settlement benefits as favorable as those received by debtors who have stopped using their credit cards. It may also increase the risk that these creditors will refuse to negotiate a debt settlement in favor of filing a law suit to collect the amount they claim is owed to them.

Don’t stress over having to use any form of credit.  Credit cards weren’t introduced until the mid 1900’s and since then the ability for consumers to save rather than charge has become almost non-existent.  Any form of credit is nothing but a temporary “fix” on situations.  While you may be able to escape some of your problems at the present time through the use of credit cards, it will eventually catch up with you in the end.

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Since accounts are sold and outsourced to different agents to collect so often it is easy for an agent to forgot or overlook an account when they update their system. Sometimes it’s a matter of the creditor / agent just closing the account in their office.

This situation is pretty simple to correct. Our client service department will contact the current collector and inform them the account has already been settled. Agents will request settlement documentation at that time which we will provide (acceptance letter & copies of all checks cashed if available) we do this as a courtesy to our client. Technically once we inform a collector that an account has already been settled it is their responsibility to go back to the original creditor and confirm this info. Once we provide the settlement information the accounts are closed and no further collect attempts are made.

In rare situations it will take a second conversation with the collector to get the account closed and marked as settled. Our clients can also pull a credit report and dispute the account in question to ensure no further collection action is taken. The client can also file a complaint with the FTC if the agents start to harass them after collection proof is provided.

There is only 1 time that I can recall that collections efforts escalated into litigation. In that situation the client went to court, provided all settlement documentation to the judge, and the case was dismissed.

In a nutshell this is a easy problem to fix.

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As discussed in previous postings (see “Commitment“), entering a debt settlement program is a LONG-TERM commitment.  It takes a great deal of time and effort for the debt settlement company to negotiate settlements and it takes time and effort for you, the client, to save money for the settlements.

When evaluating doing business with a debt settlement company there are many important questions to ask.  However, the following items represent what I consider to be the “top 10″ questions to ask as you investigate various debt settlement companies:

1. How long have you been in the debt settlement business? In my opinion the answer needs to be at least 10 years.  Any less and the company does not have enough of a track record to provide feedback on average settlement rates etc. 
2. Are you going to be handling my settlements or do you outsource this to a third-party?  Generally speaking you do NOT want to be dealing with more than one company.  You are going to feel more at ease dealing with a single entity rather than several.
3. Are you a member of the Better Business Bureau (BBB)?  If not you can immediately discard the company regardless of what they say.  If they are a member visit www.bbb.org to search for the business listing.  Make sure that all outstanding complaints, if any, have been resolved.
4. Can you do business in my state of residence?
5. Can you reach settlements with my creditors?  Provide the company a list of your creditors with the respective balances.  Make sure they have a history of settling with your particular creditors.  Tell them your story.   Provide a little background as to how the debt accrued.
6. What is the total cost of the program including fees?  This figure should be somewhere around 60% of your current debt amount.
7. How much are your fees and how are they assessed?  The answer you should be looking for is somewhere between 15 – 20% and the fees should be fixed.  If there are “administrative”, “retainer”, “variable”, or other fees involved, or if the company cannot quote you a figure for fees then this might be a red flag.
8. What are your hours of business and who can I contact if I have a question regarding my account?  The rep you speak with on the phone with may not ultimately be the person you have to deal with if you have an issue.  Strong customer service is the cornerstone of a successful debt settlement company.
9. What is your web address (URL)?  The company website can provide a wealth of information as to the legitimacy of the business.  Make sure they list a physical address under the “contact us/about us” page.  Look around for fresh content.  Make sure the site is copyrighted for the current year.  Make sure there are no discrepancies between the messages on the website and what the representative on the phone tells you.
10. Ask a couple tough questions and guage the response.  For example, “can my creditors sue me”, “will they continue to call me”, and “will my credit score go down”?  The answer to all these questions is “yes” so make sure the representative does a good job explaining why.

Our client’s original estimated program term was 29 months.  However, he continued to struggle with his income and expenses after enrollment.  Six of his regularly scheduled monthly deposits were returned as non-sufficient funds (NSF) by his bank.  He has also made special requests to skip or reduce his deposits on 3 other occasions.

We take these types of problems very seriously.  If a client continues to demonstrate an inability to make his monthly deposits as scheduled, we may consider closing the client’s debt settlement program.  This is not to be inconsiderate or unsympathetic to our client’s on going financial problems but to encourage them to look for different options that may suit them better.  Our debt settlement program simply cannot be effective if the client cannot afford it.

We never had to consider closing this particular client’s program despite some of his financial problems.  He was always in communication with us immediately whenever there was a issue.  He made efforts to make up the NSFs or skipped deposits.  He was honest about his situation and he understood why this was a serious matter.  He made all efforts necessary to continue with the program and we stayed committed to help him and to make necessary adjustments to our settlement strategy to accommodate his situation.

In the end, his program term extended only 4 months longer than originally anticipated and we were able to settle his accounts for 41% of the total balance owed.

Ref. 1539

One account was not settled because the account could not be located.  When we contacted the credit card company, we were told that they had no record of the account.  We asked our client to obtain their free credit report so that we could review it.  It turns out the account could not be found on the credit report either.  This is rare but we come across these situations from time to time.  There are several possible explanations.  Perhaps the credit card company simply made internal errors and erased all record of the account.  Maybe the credit card company has simply let the account slip through the cracks and they don’t want to bother with it anymore.  It may even be possible that the account may resurface in the future.  In any case, the clients decided to simply close the account since no one was collecting on it any more.

Our client can move forward with their credit card debt-free life with confidence that if the account ever resurfaces in the future, they can come back to Provanta and we will help them resolve it.

Ref. 1537

I can’t say I blame our clients for making that choice.  Knowing something might happen and then actually experiencing it are two completely different things.  The latter can be extremely unpleasant.

Despite the creditors choice to litigate, we always encourage our clients to stay with the program and reach their ultimate goal of becoming debt free.  We provide support and guidance to help them through the unfortunate situation.  We explain that although one creditor may have filed a lawsuit, it does not mean others will.  More importantly, we continue to negotiate for settlements on accounts even if the accounts are in litigation or have judgments.  Settlements may still be reached in these situations.

For example, a client who recently graduated from Provanta’s Debt Settlement Program started the program with 7 accounts.  In 2006, one of her creditors decided to file a lawsuit and obtained a judgment against our client for a balance of $8100.  We had already settled 3 accounts for her and she had 4 accounts left including the judgment account.

Though she was distraught over her situation, she decided to stick to her original plan- to complete Provanta’s Debt Settlement Program and resolve her unsecured accounts.  We continued negotiations with the remaining creditors.  About a year later, in the spring of 2007, the creditor who filed a lawsuit finally realized our client would not be able to pay the judgment.  They offered to settle the account for $5698.  This was a good offer considering our client’s situation so we helped her take advantage of it.

Even though this particular account settled for 70% of the balance, the overall settlement percentage for our client at the end of her program was 42%.

(Ref. 1536)

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The client had enrolled in our debt settlement program earlier this year.  He and his wife had always kept their credit cards separate so his wife was not required to join the program although we highly recommended that she did.   Our client has been battling cancer for the past five years, had brain surgery to remove a tumor and only received disability income since he can no longer work.  They had an extreme medical and financial  hardship which made our debt settlement services suitable for both of them.  However, our client was hopeful that if we could help him with his accounts, they would be able to manage his wife’s debt on their own.  They wanted to try to maintain her credit rating as well as have access to a credit card in case of emergencies.

Seven months later, I am working with the wife to add her accounts to his program.  Although they have tried to keep up with her bills during this time, their situation has worsened.  She fell behind on payments a few months ago and have not been able to catch up since.  She has gone through some personal medical problems, have had surgeries and missed a lot of work.  The emotional stress of dealing with financial and medical problems escalated into a deep depression for our client’s wife.   On top of this, our client’s cancer, which had been in remission for a little while, has come back.  He will start chemotherapy next month.

I was extremely sad to hear that our client’s situation has gotten to this point.  While I am glad they decided to enroll her accounts, I wish their decision was motivated by different circumstances.   Our services will not be able to help them with the medical struggles they’ll soon be facing but we can help alleviate some of their current financial burdens.

(Ref. 1535)

Technorati Tags: debt settlement, financial hardship, medical hardship

Our negotiator picked up on the words, “first offer,” that that the agent choose to use.  This lead our negotiator to believe she could offer a lower settlement.  The negotiator declined the offer and asked if that was the lowest she can go at this time.

The creditor came back with $506, or 80%  of the balance.  Again our negotiator advised the agent this was too high for our client.  The agent gave another offer of $442.  This continued on until she got down to her bottom line offer of $379.02, or 60% of the balance.

Considering this account started off with a balance under $1,000  this is a reasonable offer that will be presented to our client.

Technorati Tags: debt settlement results, debt settlement percentages, debt settlement offers, debt negotiation process

In a situation last week, one of our staff was negotiating with an agent and stressed that the client is financially insolvent.  This client has medical conditions which prevent her from working and relies on the small amount of social security which barely covers her monthly expenses.

The agent felt truly bad for the client and “went to bat.” for her. Later in the day the agent called back after reviewing the settlement with her manager, declining our offer. When asked why the agent informed us that the client has two open lines of credit and had thirteen recent loan inquires listed on her credit report, most recent as yesterday.  With the information gathered the agent felt the client was not insolvent and requested a larger settlement amount.

tags]debt settlement results, debt settlement percentages, debt settlement offers, debt negotiation process[/tags]