Why would a creditor settle for less??

Q. Why Would a Creditor Agree To Accept Less?

A: The primary reason a creditor will accept a settlement is because it is cost effective for the creditor, plain and simple. The degree of the discount (how much they will forgive) will vary case-by-case; therefore, a creditor will take into account many factors when determining their bottom line on accepting a settlement.

The primary factor creditors take into account is what percentage of the debt is likely to be collected in the future if they do not accept an offer now. The other factor creditors look at is what is the likelihood of collecting the full debt through normal collection activity or through the legal system.

Before they agree to any settlement, they will often take into account, debtor's income, the state they live in, the age of the debt, type of debt, debtor's assets, etc.

Professional negotiators will put a case together that will make the creditors understand that it is in their best interest to settle the debt and accept their offer.

Bankruptcy Vs Debt Settlement

Q. Is Debt Settlement like Bankruptcy?

A: There is a major difference between Debt Settlement and Bankruptcy in many areas. Chapter 7 Bankruptcy remains on your credit report for a minimum of 10 years, whereas your charged-off accounts (the derogatory accounts) may remain on your credit file for only 7 years. Sometimes, these may be removed by a competent credit repair firm earlier. But be advised that most credit repair companies will just take your money and not deliver the promised results.

Never enter a Debt Settlement program, under the assumption that you will get the negative accounts removed in less than 7 years. To be safe, base your decision on the 7 year rule, then, if you are successful in removing negative accounts earlier, it will just be frosting on the cake.

Bankruptcy reporting on your credit file may also affect other areas of your life. Bankruptcy is a PUBLIC RECORD. Most counties report recent bankruptcies in the newspaper every month or every quarter. The is also a publication that most lenders subscribe to the provide them all the recent filings. Bankruptcies filings can be found at the county registry as it is considered public information.

So its important to understand that a bankruptcy is not easy to hide from and is considered public information.Most employers pull credit files on potential candidates. It is likely that the candidate without bankruptcy will have a better chance at the position. Additionally, some employers will not hire an individual with a bankruptcy on their credit file, period. Lastly, some positions will absolutely exclude a candidate with a bankruptcy. This is especially true for security jobs, high level management jobs, jobs at banks and financial institution and many other types of positions.

Bankruptcy can also cause issues with renting. Many landlords will not rent to individuals with a bankruptcy file. While, landlords cannot discriminate, they may legally not rent to someone based on their credit profile.

Bankruptcy can also exclude you from loans in the future. While its true that some creditors will grant credit after a person files bankruptcy, (although there is typically a waiting period) some creditors will not grant a loan to anyone with a bankruptcy on their credit file. Most loan applications ask if you have filed bankruptcy in the past 10 years, and some actually ask if you have ever filed for bankruptcy. Although the question – have you ever filed for bankruptcy may not be a lawful question, nonetheless, if you do not answer it, it will raise a red flag and if you answer “no” you will not be truthful.

No matter how you cut it, bankruptcy can affect many areas of your life and should be avoided at all cost. It should be your last resort. You should not file bankruptcy until all your options have been exhausted or at the very least explored, unless you have come to the decision that you have no other viable options.

What is the difference between a Debt Settlement Program and Debt Management Plan

Q. What is the difference between a Debt Settlement Program and Debt Management Plan (DMP)?

A:Debt Management

In a debt consolidation programs, also known as a Debt Management Plan (DMP), you pay back 100% of your debt plus interest. Interest is commonly reduced to the 8% to 10% range. Additionally, Most Debt Management Companies have a monthly service fee tacked on to your monthly payment. Most people pay back about 130% of their debt over 5 to 6 year period. Debt Management has a moderate affect on a good credit file and will improve most poor credit files.

Debt Settlement

In a Debt Settlement program, most pay back an average of 40-50% of their total debt, including all agency fees as well as accruing fees and interest. This 40-50% figure is based on your starting balances.

In some cases, where a client has very challenging creditors combined with a good income, liquid assets, etc., Certified Debt Specialists may end up with what they consider to be a less than perfect result and pay back may be in the 60% range. This is still a substantial savings for most clients and proves to be an effective program.

Also, the contrary is true. Certified Debt Specialists often are able to obtain total settlements including fees in the 40% range when the factors are just right.

Most clients are able to liquidate their debt in 2 to 3 years vs. 5 to 6 years in the DMP and the monthly payment is commonly smaller than a Debt Management Payment for the same debt.

Debt Settlement has a major impact on good credit but will improve credit for people that are 6 months or more past due. This improvement in credit profile is caused by bringing outstanding balances down to a ZERO balance
From "International Association of Prefessional Debt Arbitrators"

Brief History of U.S Consumer Debt

Here at Achieve we strive to give you ideas on how to change spending habits and learn to live without credit, and therefore without debt. There are not many people who can remember a time where borrowing money to buy what you want was not a normal part of life. But it was, at one time, how everybody operated. Consider the following brief history.

In 1856 former U.S Senator Thomas Morris observed in his assessment of America’s credit system, “in my opinion, we have too much, instead of too little credit; too many of our citizens are endeavoring to live on credit , instead of industry.” Senator Morris’ comments came just as consumer credit was taking root in American Society. Only a short time after in the 1920’s did we experience a huge falling out economically, much like today, because of the principles and risk of living more and more on credit rather than actual dollars.

It was not until the turn of the twentieth century that consumer credit began to be accepted more widely in American Society. In 1899, economist researching household money management discovered that trends in personal credit were undergoing significant changes. Installment debt was suddenly widespread among many Americans and was representative of all levels of the social economic ladder.

This movement toward an increasing use of credit for personal consumption grew through the era leading up to the Great Depression. “By 1926 two of every three cars sold were bought on credit. Over the same period, outstanding consumer debt nearly doubled (in constant dollars), while household debt as a percentage of income rose from 4.68% to 7.25%” Quoted out of the book Buy Now Pay Later: Advertising, Credit and Consumer Durables in the 1920s.

Much like the prediction prior to the turn of the century, when credit was mostly limited to individuals borrowing against their existing assets to pay for the next planting season or for proprietors to provide locals the ability to buy goods from them and pay later, consumer credit took a giant leap forward in the late 80’s and early 90’s. In fact starting in 1991 until the first quarter of 2001 when expansion finally came to an end, total household debt, consumer credit debt, and mortgage debt all doubled. This along with other factors stemming from economic recession, led to the current situation America finds itself in today.

What does all of this mean? Well at Achieve Security, with your program structure you are already changing your habits. I am sure everyone has had to make some lifestyle adjustments, and now you are conditioning your self to placing money in an account for savings to pay off your debt. You will finish this program and find that if you continue to save money each month and exercise some discipline, in a very short time you can pay cash for a big purchase, rather than buy on credit. The more you learn to practice this habit, the more dollars you will save in not paying interest on revolving credit balances.