DEBT SETTLEMENT Video & FAQ: DebtFreeLeague.com Explains Debt Negotiation Bankruptcy Alternative

Oct. 8, 2010 - PRLog -- DEBT SETTLEMENT is often misclassified in online portals like Google, Bing, Yahoo! and Wikipedia as a “debt consolidation” solution. However, DebtFreeLeague.com clarifies the debt negotiation strategy as a “bankruptcy alternative” that helps consumers to avoid bankruptcy.

Principals at Debt Free League state the term “debt settlement” actually stems from the term “debt negotiation” a form of “debt forgiveness” that was initially practiced between creditors and insolvent small businesses.  

Early on, the practice involved the negotiation and settlement of business debt.  Hence, it became widely known as debt settlement.

The debt elimination practice rose in popularity in the consumer marketplace during the savings and loan crisis of the late 80s and early 90s.

"During the savings and loan crisis, banks were eager to settle unpaid consumer debts.  If not, they could have lost billions in profits due to a higher rate of bankruptcy filings,” explains Eric Santacruz, Debt Free League Vice President.

The latter statement distinguishes the effectiveness of the bankruptcy alternative.

WATCH DEBT FREE LEAGUE – DEBT SETTLEMENT VIDEO:    
http://www.youtube.com/watch?v=g1WM4mtnF8M



The clear purpose of the solution is to create a win-win agreement.  The debtor becomes debt free.  And creditors recover income that would ordinarily be lost as a result of a bankruptcy, or if collection efforts appeared too costly or time-consuming.

Rivaling debt consolidation, the procedure works on a greater variety of credit card and unsecured accounts as well as on medical and business debt.

The estimated time to complete a debt settlement program is 12-36 months, which is generally a much shorter time frame than debt consolidation.

Santacruz adds, “Because of our low fees, we normally structure a 28 month debt settlement program for our clients.”

NOTICE:  Debt Settlement is an aggressive bankruptcy alternative.  It best suits the debt reduction needs of people that do not qualify for, or can not get appropriate debt relief via a debt consolidation program. Although widely practiced in major states like California, New York, Texas, and Florida, debt settlement is not allowed in some states.

DEBT SETTLEMENT FAQ (5 Frequently Asked Questions):

1. How does debt settlement affect my credit?

Debt settlement can cause the consumer credit to decline because of late payments, charge-offs, and collection accounts. However, the manifestation of a debt settlement also decreases the debt-to-credit ratio, which composes one third of the consumer credit score. The debt-to-credit ratio is a proportion of your credit and loan account balances to the accounts' credit limits. Lenders use this equation to see if you can qualify for more credit. Having a debt-to-credit ratio of 30% or better, you can qualify for loans with favorable interest rates. But if it’s over 50%, you are seen as a high credit risk.

2. Does debt settlement stop collection calls?

There's no sure way to completely stop the collection calls. However, the Fair Debt Collections Practices Act (FDCPA) allows you to send out a cease and desist letter to a third-party debt collector to require them to stop calling you. After receiving the letter, the debt collector may contact you one more time, but only to inform you of what, if any action they intend to take to collect the debt. Note: The cease and desist letter does not apply to the original creditor.

3. How does debt settlement rival debt consolidation through credit counseling?

Credit counseling debt consolidation plans have a 21% completion rate since they only produce interest rate reduction. However, this doesn’t give people much debt relief. In contrast, debt settlement reduces the total debt including principal and interest.  This allows you to be debt free much faster. Unlike credit counseling, debt settlement also negotiates business debt.

4. Is bankruptcy a better option?

Bankruptcy remains in public records for 20 years and on credit files for 10 years and can cause you to be turned down for credit and employment. You may also have to forfeit property and assets.  Due to the most recent bankruptcy law, it’s way more difficult to qualify for Chapter 7, which allows you to discharge most debts.  However, debt settlement is a bankruptcy alternative that can help you avoid bankruptcy and settle your debt at a considerable fraction of what you owe.

5. Do I have to pay taxes on the amount I save?

The creditor that forgives a portion of your original debt must give you a 1099-C tax form.  They must also report to the IRS the forgiven or canceled portion of the debt that exceeds $600 as taxable income. However, the IRS does not require you to report the forgiven debt if you were insolvent.  This means that the amount of your debt was greater than your assets when the creditor forgave the debt.

ADDITIONAL QUESTIONS OR CONCERNS?  CALL DEBT FREE LEAGUE FOR
A FREE DEBT EVALUATION: 1.800.213.9968  http://www.debtfreeleague.com

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Debt Free League helps consumers compare debt relief options including, debt settlement, tax settlement, debt consolidation, bankruptcy, and student loan consolidation to find the best service and price. For a FREE debt evaluation call (800) 213-9968.