Frequently Asked Questions
How does the process begin?
What if I bank and have credit card debt with Chase Bank?
What if my mortgage and credit card are with Bank of America?
Is there a chance I can lose my assets?
Which debt do I settle first?
How are taxes handled during debt settlement?
Do you offer a guarantee?
Am I a good candidate for debt settlement?
How much will debt settlement cost?
What types of debt can be included in debt settlement?
What if I’m a business owner?
What are the cons of debt settlement?
What are the pros of debt settlement?
What do I look for in a good debt settlement expert?
Debt Settlement FAQs
Trident Debt Solutions Is here to answer your questions
When considering debt settlement as a means of getting out of debt, it’s natural to have questions about how it works. We’ve compiled the most commonly asked questions below.
Will debt settlement work for me?
- Do you owe $30,000 or more in unsecured debt and have suffered some significant financial hardship?
- Do you have any savings or other liquid assets that you can use for a lump-sum payment of about 50–60% of your total debt, or can you raise that amount in 18 months or so?
- Can you make a monthly payment of at least 2-3% of your total debt?
If your answer to most or all of these questions is yes, then debt settlement could be a great option for you. We’ll go over your specific circumstances with you to help determine whether you’re a good candidate for our debt settlement program.
What is debt settlement, and how can it help me?
Debt settlement, also referred to as debt negotiation, is the art of negotiating with your creditors so they will accept less than the full amount of the debt owed to them, generally 50–65 cents on the dollar, in full satisfaction of the debt.
The goal of our debt settlement program is to get you out of debt within a relatively short amount of time (18 months or less), at a significantly reduced cost, without having to file bankruptcy. When you enroll in our debt settlement program, you’ll be able to see that there is light at the end of the tunnel.
The fact that debt settlement is a means of becoming debt-free while avoiding bankruptcy is often a big relief to people, many of whom simply do not want a bankruptcy notation on their credit report and in public files. With debt negotiation, you will never have to check the “yes” box to the question about whether you have ever filed a bankruptcy. We see this question on applications for unsecured credit, mortgages, apartments, and even some jobs.
Is debt settlement the same as consumer credit counseling?
No, they are not the same thing at all. In a consumer credit counseling plan, you pay back all of your debt over time, plus interest (although usually at a reduced interest rate). With debt settlement, your creditors agree to let you pay back less than the total amount you owe, typically only 50 to 65 cents on the dollar. Another important difference is that, although they are technically considered to be non-profit, consumer credit counseling firms are actually funded by credit card companies! Credit counseling may be a viable option if you have less than $20,000 in debt and make a reasonable income, and the proposed repayment plan fits your budget and will be completed in less than 36 months. In many cases, however, consumer credit counseling plans extend from four to six years, which is painfully long and can damage your credit further.
How is debt settlement different from debt consolidation?
Debt consolidation is a term that is easily misunderstood and often misused, and it is not the same thing as debt settlement. True debt consolidation involves taking out a loan greater than or equal to the combined amounts of your current debts and using that money to pay off those other debts. You would likely only be able to get a debt consolidation loan if you have collateral, like a home or car, to borrow against. Debt settlement doesn’t involve any new loans or debts; instead of paying off your creditors in full, you’ll only have to repay a fraction of what you owe.
Is debt settlement legal?
Yes, it is certainly legal to negotiate with your creditors to settle a debt, and any agreement we make with your creditors is binding.
Do I have to be behind on my bills to enter your debt settlement program?
No. Whether you are behind or current on your monthly debt payments, we can help you.
How it Works
When you sign on as a debt settlement client, we set up a trust account for you. You fund the account with a lump sum of money that we will use to negotiate with your creditors. If you don’t currently have a lump sum available, we’ll review your budget to see whether a monthly payment plan is feasible. Generally, we require that you make a monthly payment of at least 2-3% of your total debt. From that point, you’ll stop making further payments on your unsecured debts (you continue paying on your secured debts, such as your mortgage, car payment, etc.), putting money in your trust account instead. When there are sufficient funds in your trust account to make a reasonable offer to your creditors, we start contacting them and settling your debts one by one.
This strategy works best for credit card debts. We also accept other unsecured debts such as medical bills, broken leases, and deficiencies from repossessed vehicles.
How long does debt settlement take?
Our goal is to get you out of debt as quickly as possible, and in most cases, we can settle a client’s debts within 4–18 months. If you have a lump sum available now, we may be able to settle your debts in a month or less. We don’t recommend debt settlement for someone unless we think they can complete the process in less than two years.
Can’t I settle debts myself?
Although you can certainly work directly with your creditors to settle your debts yourself, there are many reasons you may prefer to have us negotiate those settlements for you. First of all, debt settlement isn’t a sideline for us: It is all we do. Second, we’ve been in this business a long time, which means we have the experience needed to handle your creditors effectively and get you the best possible settlement. In short, with us doing the negotiating for you, your creditors won’t have the upper hand—you will.
Skilled collectors are very good at getting information from consumers that will aid them in debt collection, and when individuals try to settle debts themselves, they often offer up information that hurts their chances of settlement. We know what to say—and what to withhold—to achieve maximum savings. We know the rules creditors and debt collectors must follow, which means they can’t use tactics on us that they may try with an individual. Most collectors are masters at intimidation and guilt, and they use these tricks as two of their major weapons. But we are immune to those tactics, so creditors are more likely to settle with us quickly and for a lower amount. Also, we’ve dealt with virtually every major creditor in the United States and know their guidelines and how they operate, so we usually have a good idea even before we begin negotiations what their lowest offer will be. Maybe more important, we know how to prioritize which accounts get settled first so that you save the most money overall.
Finally, our founder and president, Steve Craig, is a bankruptcy attorney with more than 20 years of experience in bankruptcy law. This gives us leverage because creditors realize that if they refuse to settle, bankruptcy is an option we will not shy away from, if necessary—in which case, they would get no money at all.
Debt Settlement Details
Will Trident Debt Solutions contact all of my creditors on my behalf?
Not initially. We contact each creditor, one at a time, when we have sufficient funds to reach a settlement on the account.
When will you start negotiating with my creditors?
After you’ve entered our debt settlement program, we will begin negotiating with your creditors as soon as we have sufficient funds in your trust account to make a reasonable offer to one of your creditors. Typically, this is about six months into the program, but having a lump sum available at the outset will enable us to start the negotiations sooner.
How will I know what Trident is doing for me?
You can call or e-mail us at any time and find out what your trust account balance is, what debts have been settled, and what the next debt is that we intend to settle. We are also available to meet, either in person or over the phone, if you’d like to schedule an appointment to review your file.
Where is my money being held until a settlement can be reached?
We will hold your funds in an insured depository account referred to as a “trust account.”
What happens if I miss a payment to my trust account?
We realize that there may be a time when something unexpected occurs and you are unable to make your monthly payment. If this happens, we let you continue the next month where you left off. However, time is of the essence. All we ask is that you call and let us know.
Can I put more money into my trust account?
Yes, we encourage it. The sooner you can accumulate more funds in your trust account, the sooner we’ll be able to settle your debts. Look for ways to contribute more than your monthly payment to your account, such as using your tax refund or annual bonus.
Can you stop interest and late fees from accruing on my accounts?
No, interest rates and late fees will not stop accruing during the term of our program, which is why it is critical that you get your debts settled as quickly as possible.
What types of debt can be included in debt settlement?
The best debts for our debt settlement program are credit card debts and other unsecured debts that are greater than $1,000. On the other hand, things like tax bills, student loans, and secured debts—such as your mortgage or car loan—cannot be included in a debt settlement program. Other debts, like medical bills, fall into a gray area. When we go over your list of debts with you, we’ll advise you as to which one we’ll be able to settle.
What is the difference between secured and unsecured debts?
An unsecured debt is one that has no collateral associated with it. Examples of unsecured debts are credit cards, overdraft lines of credit, signature loans, bounced checks, deficiency balances on repossessed vehicles, and medical bills. Secured debts have collateral. Some examples of secured debts are mortgages, home equity lines of credit, and car loans. Secured debts can become unsecured if the collateral is surrendered (such as in the case of foreclosure or repossession) and there is an outstanding balance on the debt. If that happens, those debts can then be included in our debt settlement program.
Are there debts that cannot be included in the debt settlement program?
Yes. Debt settlement cannot cure every financial problem, nor is it the right step for every individual. We typically cannot settle tax debts, secured debts, alimony, child support, student loans, court restitution orders, or criminal fines. We also do not settle debts that are less than $1,000. And while we generally prefer to work with larger, national creditors rather than local finance companies or debt collectors, we’ll review your situation with you in order to determine which of your debts we would most likely be able to settle.
What about debts that have co-signers?
If someone else has co-signed a loan with you, the co-signer may become legally responsible for paying your debt if you do not pay it in full. This means that these types of loans are not ideal for our debt settlement program. However, if the co-signer is also a client of ours, we can settle the debt on behalf of both of you. Please talk to us about any co-signed debts you may have.
Can I include only those debts that are causing me problems?
You are not required to include all of your unsecured debts to enter our debt settlement program, although we prefer that you do. The reason is that creditors have access to your credit report, and if they see that they aren’t getting paid but another creditor is, they won’t be inclined to reach a settlement favorable to you. We allow you to leave out one or two cards if you feel it is necessary, but we do not recommend it.
Dealing With Creditors
Can you stop creditors from calling me?
In the vast majority of cases, yes. Once you join the program, we send each creditor a “Cease Communications” letter instructing them to communicate to you only in writing. Most creditors will abide by this letter, although some will not. If creditor calls continue, you have some options. We will discuss this in detail with you on your first appointment with us.
Should I communicate with my creditors?
No, you should leave that to us. If they call you, simply tell them that you have hired a debt management firm to deal with your debts, and give them our name and phone number. Give them no further information and ask them to communicate with you only in writing.
Will I continue to receive correspondence from my creditors?
Yes, you will continue to receive statements—and, potentially, collection notices—from your creditors. Creditors may also send settlement offers directly to you once they know you have hired us. We ask that you read all your mail and report any settlement offers to us promptly so we can contact the creditor to try to negotiate a better settlement.
Do I continue to pay my creditors while I am in the debt settlement program?
No. While you are in the debt settlement program, you will make a monthly payment into the trust account set up to accumulate funds for negotiating with your creditors. The only debts you will continue to make payments on are those that are not included in our program, such as your car payment, mortgage, or student loan.
What are the risks of not paying my creditors while I am in the program?
The primary risk of not paying your creditors while you’re in our debt settlement program is that you may be sued by a creditor whose debt is in the plan, but not have enough money saved in your trust account to settle the lawsuit. To minimize this risk, we prioritize which debts to settle first based, in part, on how likely different creditors are to sue you. In the event you do get sued, we can settle that debt with the law firm if you have sufficient funds. If you do not, we can usually set up a temporary payment plan with the creditor to give you time to consider whether bankruptcy may be advisable.
What happens if I get sued during debt settlement?
If you are sued by a creditor (served with a summons) at any point during the debt settlement process, contact us right away and we will focus on settling that debt immediately. We will attempt to settle the case out of court so you won’t have to actively be a part of a lawsuit. If we can’t reach a settlement with the creditor, you will likely have to consider bankruptcy at that time.
Can my wages be garnished during debt settlement?
In order for a creditor to garnish your bank account or your wages, they must have a court order granting them the right to do so. If a creditor does sue you to collect the debt, we will typically have at least 30 days to respond before the court would issue a judgment against you. An intimidation tactic that creditors use from time to time is to say, “If you don’t pay this tomorrow we’re going to garnish your wages,” but they don’t have the power to do so without a court order.
Credit Rating and Other Ramifications
What are the tax consequences of debt settlement?
Debt settlement may have tax consequences, but usually will not. A creditor can give you a 1099 for amounts of debt forgiven, but the IRS takes the position that this is not taxable income if the debtor was insolvent at the time of the settlement—this is, had more debt than assets. If you are not insolvent, debt settlement may not be a good program for you because of the potential tax liability. Please consult a tax advisor regarding this issue, and ask your tax advisor to take a look at Rev. Ruling 908. If you receive a 1099 form from a creditor during the term of our program, call us and we will give you more information.
Will debt settlement damage my credit?
Without a doubt, debt settlement is going to negatively affect your credit. Doing anything other than paying your debts in full and on time will have a negative impact on your credit rating. That being said, whether it’s really going to get worse—and by how much—will depend on what your credit rating looks like today. If you are behind on your bills, especially if you haven’t made any payments for a while, your credit may already be bad. On the other hand, if you’ve got decent credit when you enter our debt settlement program, your credit rating should be back to about where it was within about 18 months from the time you are out of debt.
Once your debts are settled, we can provide a packet containing information on rebuilding your credit. We also highly recommend the book by Steven Snyder called Credit After Bankruptcy. Although the book focuses on post-bankruptcy credit rebuilding, most if not all of the principles it describes are effective for rebuilding credit regardless of your situation.
What it boils down to is that, so long as you remain current with your mortgage and car loan, pay all your bills on time subsequent to the program, and follow certain credit rehabilitation principles, you should be able to regain a good credit rating within just a few years after settling your debts.
Which is worse for my credit, debt settlement or bankruptcy?
If you have excellent credit now, then debt settlement, consumer credit counseling, Chapter 7 bankruptcy and Chapter 13 bankruptcy will all affect your credit negatively. The relative impact of each of these debt-relief solutions is open to debate. Of the four options, I would say that consumer credit counseling and Chapter 13 bankruptcy probably hurt your credit the worst since you will not begin to rebuild your credit until you have repaid your debts under the terms of either plan, which in both cases is usually three to five years down the road. Filing Chapter 7 bankruptcy is the only method that allows you to begin rebuilding your credit immediately. In that sense, Chapter 7 is probably the quickest to bounce back from, but you will have the “bk” (bankruptcy) notation on your credit report for 10 years. Our debt settlement program lasts two years or less—without the bankruptcy notation—so I think it falls in the middle.
Will I ever be able to get a credit card after debt settlement?
This is a question we hate to answer, because our goal is to get you out of debt—not into it. It’s a good question, though, because the reality is that it can be very difficult in today’s world to do everything on a cash basis, particularly getting a plane ticket, renting a car, or shopping online.
The short answer is yes. Although it will damage your credit in the short run, being in a debt settlement program will not prevent you from getting a credit card in the future. There are a few options for doing so. First, you can keep one credit card outside our program and maintain a good relationship with that creditor. Second, you can get a secured credit card at any time during or after debt settlement. With a secured credit card, you put down a cash deposit with a bank and they issue you a credit card with a credit limit roughly equal to the amount of your deposit. The third option is to wait a few years after completing our program and apply for an unsecured credit card. If you have taken the steps we’ve shown you to rebuild your credit, and you have the necessary income to qualify, you should be able to get a card at that time.
Steve can discuss further details with you during your consultation as well as during the course of your debt settlement program.
Will my information be kept confidential?
How do I get started?
It’s easy. Start by filling out the free online consultation form and we will contact you promptly with an evaluation of your situation. This is your first step toward becoming debt-free!