Pacific Debt Blog

Debt Settlement Agreement Sample

Letter for Debt Settlement Agreement

What is a Debt Settlement Agreement?

Debt settlement is working with creditors to decrease the amount of debt that you owe. The debt settlement agreement is a written, legally binding agreement to decrease your debt through debt settlement, what happens if you default, and what happens after you pay back the settled amount.

Sample Debt Settlement Agreement Image for Download

Letter for Debt Settlement Agreement

Since you are looking at Pacific Debt’s website, you may be considering debt settlement as a hardship option. Many people want to know if they need to work with Pacific Debt, Inc. in order to settle their debt. The answer is no, but there are some very good reasons for you to work with us that will save you a ton of time, and most likely, a ton of money! Let’s look at how to go about debt settlement yourself.

How to Negotiate Your Own Debt Settlement

Before you get started, you need to have a strategic plan in place.

  1. Are You Current or Behind on Payments? How old is your debt? Debt settlement works best if you are NOT current on your payments. If you are making payments on time, creditors may assume that you are capable of paying back your debt. A creditor may be more willing to negotiate a settlement if you are behind on making payments. Read our article on How to Deal With Debt Collectors When You Can’t Pay
  2. Collection Information. You may have more than one delinquent debt. Get a notebook and set up separate sections for each debt. Include the company, the amount, the interest rate, the debt’s age. Every time you have contact about that debt, write down the details, including the name of the person who called, date and time. Decide which debts need to be paid first. It might be the least amount, the highest interest rate or other factors.
  3. Make a Repayment Timeline. Your plan should allow you to repay your debt within 24 to 48 months. Pacific Debt Inc estimates that it will take someone using our service to take 24 to 48 months, depending on your unique circumstances.
  4. Consider Selling Assets. Identify anything you can sell to raise some money. If you do, put it in a separate savings account so you don’t spend it. Pacific Debt Inc. helps set up an escrow account for you if you use our service. The goal is to have a lump sum built-up over time to settle your debt.
  5. Contact the Creditor or Collection Agency. Using your notebook, contact the creditors. Explain why you can’t pay the bill. DO NOT share bank account information or other personal financial information. Do not make promises. And importantly, don’t lose your temper! They want you to be emotional. If the company is interested in settling, they may offer a higher settlement amount. If you want to continue negotiating with them, suggest a different, lower amount. Pacific Debt Inc. knows which creditors or collection agencies are willing to negotiate and which ones don’t. It is a benefit of using our service! We have long-standing relationships established with most creditors.
  6. Consider Your Tax Consequences. Debt settlement can have some tax consequences. Since we’ve already discussed these in detail in a previous article, here is a summary. Basically, the IRS may treat the charge-ff amount (the debt settlement) as income for you. You may need to include a form 1099-C with your taxes. If you don’t, you may end up giving more money to the IRS than you need to.
  7. Get It in Writing. Click this link to find a sample debt settlement agreement. Do not make a payment until you have a debt settlement agreement signed by the company and in your possession.

Filling out the Debt Settlement Agreement

Here are some tips for filling out the letter of agreement for payment of debt.

  • The effective date is the date you make this agreement.
  • The creditor is the person you owe money to or the collection agency.
  • The debtor is you.
  • The outstanding debt is what you actually owe.
  • The sum is what you agree on.
  • The creditor will expect you to make payment by the specified date. If you don’t have the money to pay it, make sure that you factor that in.
  • The valid date is the date you agreed to pay the debt back.
  • Make two copies. Sign both and send to the creditor. They should sign and then return it.
  • Keep your agreement to pay letter in a safe place!

**We are not legal experts and have prepared this payment agreement template to only be used as a sample. It’s only intended to be a sample and it’s not meant for actual use. You should contact a legal expert in your area to discuss your options if you are intending to do a debt settlement yourself.

Should You Try Debt Settlement Yourself?

The answer to if you should DIY debt settlement or hire debt professionals like us depends on you. Only you can answer that question. If you choose to do it yourself you will have to do all the negotiating, paying, saving, and dealing with debt collectors. It can be extremely frustrating, upsetting, and requires a massive amount of time on the phone, as well as organization and patience.

Find out why Pacific Debt has been ranked as one of the “The Best Debt Settlement Companies of 2019”.

Debt settlement is not an easy process to go through by any means. If you don’t want to try debt settlement yourself, you can contact Pacific Debt Inc. Our debt settlement experts will help you understand all your options and the initial consultation is 100% free. We’ll do all the work and keep you updated throughout the entire process.

If you’d like more information on debt settlement or have more than $10,000 in unsecured debt that you can’t pay,contact Pacific Debt, Inc. We may be able to help you get out of debt in 2 to 4 years with our debt relief program. We have settled over $250 million in debt for our customers since 2002.

Pacific Debt, Inc is accredited with the American Fair Credit Council and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

For more information, contact one of our debt specialists today. The initial consultation is free, and our debt experts will give you all your options.

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Can You Go to Jail for Not Paying Taxes?

Can You Go to Jail for Not Paying Taxes?

Disclaimer – We are not lawyers or tax professionals and we are not giving legal or tax advice. These are merely some options and information about taxes. Consult an attorney or tax professional in your area to determine all your options.

Jail for Not Paying Consumer Debt

Consumer debt like credit card balances, loans or hospital bills are technically not jail-able offenses. If a debt collector is threatening you with jail, you are being harassed. This is illegal under the Fair Debt Collection Practice Act (FDCPA). However, many states have made it easier for creditors to use the court system to put debtors in jail.

Learn the common myths and scare tactics used by debt collectors.

Technically, imprisoning someone for the inability to pay consumer debts is illegal. However, you can be held in contempt of court for failing to comply with in-court examinations or payment plans. Local judges in 44 states can issue warrants for debtors who don’t show up for post-judgement appearances or do not provide information on personal finances.

Another wrinkle is that in over 200 counties, sheriff and police departments allow private debt collectors to use the prosecutor’s official letterhead to threaten debtors.

How to Avoid Jail for Credit Card Debt

Creditors and debt collectors have a clear series of steps to take before jail becomes a possibility. First, you can get sued in civil court for money. DO NOT ignore the summons letter from the court if you receive one.

Second, the debt collector must prove it is your debt and the judge must rule in their favor. If this happens, the court may garnish wages or intercept a tax refund. The only time that jail time can become a possibility is if you do not obey the court!

If a debt collector has filed a lawsuit against you, DO NOT ignore the paperwork. If you cannot pay, just showing up may convince the creditor to drop their civil lawsuit against you. The summons from the court will have clear instructions on what to do.

This link takes you to a page with more information on summons and demand letters and your responses.

Protect yourself by

  • Responding to the notices and orders from the court
  • Go to any court-ordered appearances like post-judgment hearings and debtor’s examinations.
  • Find a consumer attorney or the state attorney general’s consumer division for information.
  • As a last resort, you may be able to file for bankruptcy.

You cannot go to jail for not being able to pay, but you can go to jail for ignoring the court.

Jail for Not Paying Civil Fines or Criminal Justice Debt

If you don’t have the money to pay court costs or fines, the outcome depends on your state of residence. The Supreme Court declared that jailing someone for inability to pay court costs and fines is unconstitutional. Unfortunately, some state and local courts assess fees, fines and costs as part of the sentence, probation or parole.  If you can not pay these assessments, you may be sent to jail.

According to the ACLU, states where you can go to jail for debt include Arkansas, California, Colorado, Georgia, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Hampshire, Ohio, South Carolina, Tennessee, Texas and Washington.

Can I Go to The Police If Someone Owes Me Money?

No. Law enforcement is concerned with criminal law, not civil law. If someone owes you money and won’t pay, your only resource is to sue them in court. Most people are familiar with small claims courts after watching the many Judge Judy style shows on TV. States set an upper monetary limit, from $2,000 to $10,000, for cases fined in small claims courts. You don’t need a lawyer and court costs are generally far less expensive. Claims that exceed the maximum limit are heard in superior court.

Your steps to file a small claim suit include:

  • Meeting the jurisdictional requirements for the court
  • Does the amount you want to recover fall within the state maximums
  • You must then file in the proper venue (county where it occurred)
  • Fill out all paperwork
  • Have the papers served (may entail a small fee)
  • File a proof of service with the court so the court knows the other party has received all paperwork
  • Document your claim
  • Go to the court hearing

A Disclaimer

If you are dealing with the IRS, you really need a professional to represent you. Hiring a qualified tax attorney can make a huge difference. We are not experts in tax law and are not providing advice.

If you are dealing with criminal justice debt, your best recourse may be to contact the ACLU.

If you are dealing with civil court and debt collectors, you may want to contact an attorney or find a low-income legal adviser. If you live near a law school, students are often available to help with advice.

Pacific Debt, Inc

Before you declare bankruptcy, you may want to contact the debt settlement professionals at Pacific Debt, Inc. If you’d like more information on debt settlement or have more than $10,000 in credit card debt that you can’t pay, contact Pacific Debt, Inc. We may be able to help you become debt free in 2 to 4 years. We have settled over $250 million in debt for our customers since 2002.

Pacific Debt, Inc is accredited with the American Fair Credit Council and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

For more information, contact one of our debt specialists today. The initial consultation is free, and our debt experts will give you all your options.

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What Are The Tax Consequences of Debt Settlement?

What Are The Tax Consequences of Debt Settlement?

Disclaimer – We are not lawyers or tax professionals and we are not giving legal or tax advice. These are merely some options and information about taxes. Consult an attorney or tax professional in your area to determine all your options.

What Are the Tax Consequences of Debt Settlement?

Debt settlement can be a decision that saves you a ton of money. However, debt settlement can also have some fallout potential with the IRS. Did you know that debt settlement for less than the full amount can possibly result in tax consequences? If you are thinking about settling a debt for less than the total, you should understand the possible tax consequences.

Tax Consequences of Debt Settlement

When a creditor writes off all or part of a debt, that creditor can turnaround and then report it to the IRS as lost income and the creditor’s tax burden is reduced by doing this. However, that means you could be responsible for that lost amount. Your forgiven debt or partially forgiven debt can be considered income and you could pay income tax on it. It can even apply to foreclosures.

If you can prove to the IRS that you are legally insolvent, you usually won’t have any tax consequences. If you are insolvent, which means your debts are more than your assets, you may qualify for an exemption.

Also, if you decide to move forward with a debt settlement company like Pacific Debt, you can write off any fees you have paid.

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The 1099-C Cancellation of Debt Form

If you are forgiven $600 or more of the original balance, not including interest and fees, the creditor may send you a 1099-C form at the end of the tax year. The amount on this form is now considered income and must be reported to the IRS. The creditor will report it to the IRS in order to lower their tax burden.

If you do not get a 1099-C, don’t assume the IRS doesn’t know about the write-off. Your creditor may of submitted one to the IRS at some point. If you don’t declare the deficiency balance, you may receive a tax bill plus interest and penalties. And here’s a fun fact about the IRS, they may forgive your tax burden, but they usually don’t forgive your penalties and interest!

How does a 1099 C affect my tax refund?
A 1099-C may affect your tax refund depending on your income and other taxable considerations. Talk to a tax professional if you are filing a 1099-C and see if you qualify for an exception.

What to do if you receive a 1099 C Form?

If you have received a 1099-C from one of your creditors, you need to report the settled debt amount to the IRS as income. You could always ask the creditor yourself if they intend to file a 1099-C with the IRS.

How Much Tax Do You Pay on Forgiven Debt?

The amount of tax you pay on charged off debt depends on your unique situation and your marginal rate of tax. You are considered insolvent if your liabilities exceed your income when you settled the debt. Ask a qualified tax preparer if you can take an insolvency exemption and get your tax debt forgiven.

Debt Settlement or Write-off Tax Consequences

If you are in a debt settlement program, remember that you may have to pay taxes on forgiven debt. Find out if the creditor will be submitting a 1099-C, and if so, the exact amount they will declare on it. Next, keep your eye out for the form after the first of the year. And finally, make sure the 1099-C is correct before you submit it to your tax preparer. If it isn’t, contact the creditor to have it corrected.

If you are curious how much you may owe, check out a debt forgiveness calculator to get an idea. Remember that this is based on simple information and may not be absolutely correct.

Pacific Debt, Inc

If you’d like more information on debt settlement or have more than $10,000 in credit card debt that you can’t pay, contact Pacific Debt, Inc. We may be able to help you become debt free in 2 to 4 years. We have settled over $250 million in debt for our customers since 2002.

Pacific Debt, Inc is accredited with the American Fair Credit Council and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

Pacific Debt is currently providing debt relief coverage in the following states:
Alabama, Alaska, Arizona, Arkansas, California, District of Columbia, Florida, Hawaii, Iowa, Idaho, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Michigan, Minnesota, Missouri, Mississippi, Montana, North Carolina, Nebraska, New Mexico, New York, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, Virginia, Wisconsin

For more information, contact one of our debt specialists today. The initial consultation is free, and our debt experts will give you all your options.

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When A Debt Collector Will Sue.

When Will A Debt Collector Sue?

Disclaimer – We are not lawyers and we are not giving legal advice. These are merely some options and information. Consult an attorney in your area to determine all your options.

Getting letters and phone calls from a debt collector is a stressful, unpleasant experience. If you are on the receiving end, you know how nerve racking it can be. You’ll hear all sorts of things from a debt collector from “you are going to jail” to “promise you’ll pay.” Another concern is whether or not that debt collector is a scammer or is legit. Instead of falling for their efforts or becoming a victim of a scam, let’s take a look at what bill collectors can and cannot do and what your rights are.

Speak to a debt expert for free and find out all your options.

What is Debt Collection Harassment?

The Fair Debt Collection Practices Act protects consumers from predatory debt collectors. This federal law covers debt collectors pursuing personal debts such as medical, credit card, and mortgages. Many states have an additional fair debt collection practices act that covers other creditors. You’ll have to check your own state to see if it has a FDCPA and the statute of limitations on debts.

However, these actions are prohibited:

  • Contacting you between 9 p.m. and 8 a.m. without your permission
  • Contact third parties (family, friends and employers) about your debt
  • Speaking to your employer except under limited conditions
  • Communicating with you if you are represented by an attorney
  • Threatening violence or using profanities when speaking to you
  • Pretending to be a government official or an attorney
  • Sending letters that look like attorney or governmental letters but that are not
  • Sending derogatory messages about you to a credit reporting agency
  • Sending information on a postcard – this can include social media.
  • Attempting to collect an expired debt
  • Hiring an unlicensed credit collection agency

If you are on the receiving end of any of these actions, the debt collector is harassing you and this is illegal.

Debt Collection Rights

In addition to protecting you from harassment, you also have some legal rights. If you are contacted by a debt collector, do not agree to pay anything. Instead, do the following:

Request proof of debt. This is a written document that includes

  • the amount
  • original creditor if different from current creditor (if your debt was sold)
  • a statement that you have 30 days to contest the debt before it is turned over to collections
  • a statement that if you notify the collector within 30 days that the debt is disputed that you must receive a copy of obtain verification of the debt or a copy of a judgment

Next, request the debt collector’s name, contact information and business address. If the person refuses, you may have a scammer on your hands.

Debt Collector Scams

If you have a debt collector who is demanding immediate payment, using high pressure tactics, refusing to answer questions or provide you with contact information, wants your personal information, or wants you to pay by wire or gift cards, HANG UP IMMEDIATELY. This is a debt collection scam.

Debt Collectors and Legal Actions

Now that harassment, scams, and rights are out of the way, let’s look at some common questions.

Can debt collectors take you to court? Yes, however, it is a time consuming and expensive proposition. If you have a significantly high debt, valuable personal or business assets, or if you have the expectation of future significant assets, this may increase the risk of being sued.  

  • They cannot threaten to take you to court if they do not intend to
  • They must have a judgement to garnish your wages

How often do collection agencies take you to court, what is the minimum they will take you to court,  and will they take you to court for $500 or less? The answer depends on

  • how much you owe
  • who you owe money to – a big corporation or the mom and pop business down the street
  • where you owe the money – do they have to sue you in another state
  • how many assets you own – is it worth their effort
  • how old the debt is – always check your state’s statute of limitations

Can debt collectors see your bank account balance? Yes and no. The debt collector can see what is in your account if 1) they have a court order; 2) your bank and creditor are the same; or 3) you owe the federal government.

A debt collector may ask for your personal information or to debit your account. DO NOT GIVE THEM YOUR BANKING INFORMATION. With that information, they can monitor your account or take money out.

Can I be sent to collections without notice? Yes. It’s called “parking the debt” and is common in medical billing. If you are expecting a medical bill, stay on top of it. If your debt gets parked for whatever reason, you’ll have to fight to get the damage removed from your credit report.

What is a Demand Letter?

A demand letter gives you formal notice that your creditor is considering legal action. It may come from an attorney or from the creditor. There will be a demand for action, such as repaying your debt. A demand letter will include a threat of legal action.

If you get a demand letter, you need to read it very carefully and respond within the time limit set out in the letter. Credit collectors can and do make mistakes. Make sure that the debt is yours or that you are responsible for it. Make sure that the debt amount is accurate. If it is older than three years, check your state (or that state where the debt was incurred) statute of limitations. Each state is different, and limitations range from three to ten years.

What is a Summons Letter?

Serving papers means you will be receiving a summons. A debt collector cannot threaten to serve you if they don;t plan to follow through.

A summons letter comes from the court system. It is formal notification that you are being sued in court. It will contain the name of the court, the case number, the parties involved, and what you must do. The summons letter will either be delivered by a law officer, or a process server.

Take a summons letter very seriously. Do not ignore the letter. If you ignore the letter, you may automatically lose the case. The summons is a legal action.

If you receive a summons, you should strongly consider speaking with an attorney in your state to determine your options. The heading will read Plaintiff (the creditor) vs Defendant (you). If this is not you or your debt, respond in writing immediately. There is a section explaining how much the debt is and how and when it was incurred. Make certain these are correct. You will receive notice of where, when, and what date you are expected to appear in court. If you incurred the debt in another state, you may have to travel to that state.

For more information about the difference between a summons letter and a demand letter, please read this article.

Pacific Debt, Inc

If you are getting phone calls from debt collectors, Pacific Debt, Inc may be able to help you. We work with your creditors to cut the amount you owe on unsecured debt while you build up savings to pay them off with our well regarded and successful debt settlement program.

To be eligible for the Pacific Debt settlement program, you must have more than $10,000 in unsecured debt, and it typically takes about 2 to 4 years.

Pacific Debt, Inc is accredited with the American Fair Credit Council and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

For more information, contact one of our debt specialists today. The initial consultation is free and our debt specialists will give you all your options.

Our Debt Specialists can help you explore your alternatives to bankruptcy, including debt consolidation and debt settlement options.


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Do you get out of all debts if you declare bankruptcy?

Do you get out of all debts if you declare bankruptcy?

Disclaimer – We are not lawyers and we are not giving legal advice. These are merely some bankruptcy options and information. Consult an attorney who specializes in bankruptcy law BEFORE you do anything.

Do You Get Out of All Debts If You Declare Bankruptcy?

Bankruptcy gets tossed around like a get-out-of-jail-free card. Many people think that bankruptcy is the answer to any financial difficulty and it is an easy out. In reality, bankruptcy is expensive, complicated, and may not erase all or even most of your debts. You’ll also affect your credit rating and history usually for up to ten years.

If you think you are on the brink of bankruptcy, let’s take a look a what bankruptcy can and can’t do for you. We’ll also answer “Can you file bankruptcy on medical bills and credit cards?”

Speak to one of our Debt Experts today for more information.

What is Bankruptcy?

Bankruptcy is a legal action ordered by a court of law. You file a petition in court to seek relief from some or all of your debts. Depending on the exact type of bankruptcy, you will either be released from existing debt or have your debt restructured for repayment. It gives you a chance to start over.

Bankruptcy does come with some problems. It is expensive and complicated. Your credit will take a hit for up to 10 years. There is a social stigma associated with filing.

Find out more information on bankruptcy alternatives.

Different Types of Bankruptcy

There are several types of bankruptcy. There are four bankruptcies that deal specifically with individuals.

  • Chapter 7 is designed for individuals under a certain financial level
  • Chapter 11 includes both individuals and businesses
  • Chapter 12 is mainly for family-based farms or fish operations
  • Chapter 13 is for individuals with assets and income but who need their debt restructured

Most people are interested in a Chapter 7 or 13 bankruptcy, so we will focus on these in this article.

Click here to read The Top 10 Most Common Bankruptcy Questions.

How Much Debt Do I Need to File Chapter 7?

How much debt you need to file Chapter 7 depends on your state’s median income. If you decide to file Chapter 7, you will compare your income to your state’s median income. If you make less than the state median, you can then proceed with the next step, a means test. If you make more than your state median income, you may be able to proceed based on the results of the means test. This allows people in areas with high housing costs and other similar factors to file for bankruptcy.

Your next step is to file a means test – subtract the average of the last six months of specific monthly expenses from your current (average of last 6 months) monthly income. This gives you your monthly disposable income. The higher this number is, the less likely it is that you will be able to file Chapter 7.

Disclaimer – Make sure you consult with a bankruptcy attorney in your state of residence before making any decisions.

How Much Debt Do I Need to File Chapter 13?

Chapter 13 is slightly different from Chapter 7. If you have a regular income, you will have a plan to repay all or most of your debt. At time of writing, you must have unsecured debts less than $394,725 and secured debts less than $1,184,200.

Chapter 13 bankruptcy doesn’t require a means test. Instead, the court will look at your income to determine how long your repayment plan will last. If you make less than your state median income, you will usually repay your debts in three years. If you make more, you will repay your debts over five years, thus repaying more of your debt. During your repayment plan, creditors are forbidden to start or continue collection efforts.

Chapter 13 allows you to save your home. You must make all mortgage payments during your repayment period and you may make up delinquent payments during this time.

What Paperwork Do I Need To File a Bankruptcy?

When you file, you will need to provide:

  • Lists of assets and liabilities including all property
  • Current income and expenditures including monthly living expenses
  • A list of all creditors, amounts and type of claims (executory contracts and unexpired leases)
  • A statement of financial affairs including employer payments received 60 days before filing
  • A statement of monthly net income including source, amount, and frequency of the income, and any anticipated increase in income or expenses
  • A copy of the most recent tax return and any tax returns filed during the case
  • Provide a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling
  • Any interest in qualified education or tuition accounts

If you are married, you must provide the same for your spouse, regardless if only one person is filing.

Of course, there are specific forms that needs to be filled out. Your state’s bankruptcy court clerk will have a list of all the required forms plus any forms that are particular to your state. You may be able to fill them out online but will need to print them to be filed.

What Happens Once You File for Bankruptcy?

Once you file for bankruptcy, several events will occur. The court will declare a stay on legal actions against you. It stops creditor collection activities such as telephone calls, wage garnishments, and lawsuits (with some exceptions).

Filing temporarily stops repossession and foreclosure or eviction. If the account is still in arrears when the stay is lifted, you will lose the house or car in question. Eviction is subject to state laws and may or may not be stayed.

Once the court approves your bankruptcy, you will have some debts erased or you will have a repayment plan to complete. It generally takes three to four months to work your way through bankruptcy court.

Does Bankruptcy Clear Debt?

Bankruptcy generally clears unsecured debt such as medical and credit card debt. In fact, medical expenses are one of the three most common reasons that people file bankruptcy. The other two reasons are job loss and divorce.

Debts that are cleared include:

  • Credit card balances
  • Medical bills
  • Personal loans
  • Utility debt
  • Gym contracts
  • Other unsecured debts

Bankruptcy does NOT clear:

  • Student loans under most circumstances
  • Child support
  • Alimony
  • Purchases on a secured credit card issued by a jewelry, furniture, or electronics store – these purchases must be returned
  • Debts not listed in your bankruptcy papers
  • Debts for personal injury or death due to intoxicated driving
  • Fines and penalties for legal action such as traffic tickets and criminal restitution
  • Debt related to fraud, depending on the court order

Can You File Bankruptcy Twice?

Yes, you can file for bankruptcy more than once. However, you must wait 8 years to the day between the date of the first discharge and filing the second bankruptcy.

When to Declare Bankruptcy

Filing for bankruptcy is a last resort. Before you file for bankruptcy, contact Pacific Debt, Inc. We may be able to help you get out of debt without the long-term damage to your credit report and the social stigma.

If bankruptcy is your only option, we highly recommend you seek legal advice. Filing is straightforward but requires a great deal of paperwork and deadlines. Legal representation can smooth your path. Speak to an attorney in your state.

Pacific Debt, Inc

Pacific Debt, Inc. is a debt settlement company that works with your creditors to decrease the total amount that you owe. Your individual counselor will work with you to set up a repayment plan to discharge your debts typically within 24 to 48 months.

There are some downsides. Your credit will be affected up to seven years, as compared to up to ten years for bankruptcy. You may still receive phone calls from creditors, but many creditors are willing to take something as opposed to nothing and will work with you.

Before you decide to file bankruptcy, take the time to consult with one of our counselors. You may be glad you did.

For more information, contact one of our debt specialists today. The initial consultation is free and our debt specialists will give you all your options.

Find out how credit card interest works.

How Does Credit Card Interest Work?

That piece of plastic in your wallet is very convenient, easy to use, and a fast way to get into financial difficulties. A large part of financial trouble is directly related to interest rates (and fees). Let’s discuss how credit cards and credit card interest works. Once you understand, it’s easier to control your spending.

How Do Credit Cards Work?

A credit card is a form of a revolving loan, called a line of credit. The company assigns a credit limit (how much you can borrow in total). The amount you can charge to your credit card is called your credit limit. Every time you use the card, that amount is subtracted from your credit limit. When you pay it back, your credit limit goes back up.

Your credit limit is:       $5,000

You charge:                     $1,000

You can charge:             $4,000   until you pay off the $1,000

You pay off:                     $500

You can now charge:    $4,500

A secured credit card has a set limit paid by you and placed in a secured account. You can only charge up to that amount. Secured credit cards are a great way to build or rebuild credit scores.

You can use a credit card for purchases, balance transfers, and cash advances. In exchange for using this line of credit, you are charged an interest rate, called an Annual Percentage Rate (APR).

If you would like to talk to a debt expert for more information, click the link below to get started.

How Does APR Work?

APR is fairly complicated and is the reason that most people get into financial trouble. The credit card company assigns an interest rate to you based on your credit worthiness, the Federal Reserve, and other factors. The average ARP as of January 2019 was 15.96%.

APR is calculated or compounded either monthly or daily. For monthly compounding, the interest rate is basically divided by 12. For daily compounding, the APR is divided by either 360 or 365, over 12 billing cycles. However, it’s more complicated and your interest rate is actually higher than your stated interest rate, regardless of how it is compounded.

Let’s say you are charged an APR of 12.99%. With monthly compounding, your actual interest rate is 13.79%. With daily compounding, your APR is actually 13.87%.

You can also have a nominal APR and effective APR. A nominal APR is the true interest rate, based on compounding. Your effective APR includes all the fees that you’ll get charged. We’ll go over fees later.

How Does Credit Card Interest Work?

If you pay off your entire balance before the end of the billing cycle, there is no interest charged. If you don’t, the credit card company charges you for the average/actual daily balance times the monthly/daily interest rate and then times the number of days in the billing cycle if compounding daily. Clear as mud, right? Don’t worry, we’ll go over the actual math under the next heading.

The credit card company then adds in fees. The total amount of interest and fees plus a percentage of your purchases is your minimum payment. The credit card company pays itself first out of your payment. Anything left over is applied to your principal. This is why it is so hard, if not impossible, to pay off a credit card through minimum payments.  

Fees and Variable APRs

Every card is different, so you may or may not have these fees.

  • Annual fees – charged for the privilege of using the card. Ranges from $19 to $500 per year.
  • Balance transfer fees – if you move a balance from one card to another. READ THE FINE PRINT.
  • Cash advance fees – if you borrow money against your credit card, or use overdraft protections and convenience checks
  • Expedited payment fee – charged for making phone payment
  • Finance charge – monthly charge for carrying a balance
  • Foreign Transaction fee – charged if you use the card to make a purchase in non-US dollars. This includes purchases over the internet
  • Over-the-limit fees – if you charge more than your credit limit
  • Late fees – charged for paying late
  • Returned check fee – charged if your payment check bounces
  • Application fees – a one-time charge for applying for a card
  • Limit increase fee – charged when you ask for a higher credit limit
  • Replacement fee – if you lose your card

Variable APRs

All of these can increase your credit card’s APR.

  • Purchase APR – the interest charge on purchases
  • Introductory purchase APR – to attract new customers, a low APR for a limited time
  • Promotional APR – special rates offered for a short period of time or on certain balances
  • Balance transfer APR – lower APR on transferred balances, often short-term APR
  • Introductory balance transfer APR –   0% intro APR rates on balances transfer
  • Cash advance APR – charged on cash borrowed against your card
  • Penalty APR – often incurred after multiple late payments or exceeding your credit limit

As you can see, having a credit card can be really expensive! Examine your credit statement carefully so you know what you are being charged.

How To Calculate Interest Rate

Now comes the fun stuff! Math! We’ll break this down as simply as possible.

You’ll need to know

  • Your average daily balance
    • add together all the charges for your billing cycle
    • divide by the number of days in billing cycle – usually 30
  • Number of days in your billing cycle (on your credit card statement)
  • APR – let’s do just the purchase APR to make calculations simple

Now for some numbers…

Your card has an average daily purchase balance of $1,500 and your APR is 15.99%

Now, to figure your daily periodic rate, divide your APR by number of days in the year

0.1599 / 365 = 0.00044

Multiply the daily periodic rate by your average daily balance to find daily interest charge

0.00044 x $1,500 = $0.66

Next, multiply your daily interest charge by the number of days (30) in your billing cycle. This gives you’re your monthly interest charge

$0.66 x 30 = $19.80

Then you need to add in all the fees that your card charges to find the total amount you owe each month

Or you can use our online interest rate calculator!

Just remember that the credit card companies set up terms to benefit themselves, not you.

Pacific Debt, Inc

If you’ve found yourself in extreme credit card debt and can’t make the minimum payments. Pacific Debt, Inc can help you. To be eligible for the Pacific Debt settlement program, you must have more than $10,000 in unsecured debt, and it takes roughly 2 to 4 years to complete.

Pacific Debt, Inc is accredited with the American Fair Credit Counsel and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

For more information, contact one of our debt specialists today. The initial consultation is free and our debt specialists will give you all your options.


Click here to find out what types of credit cards you should have.

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