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.

FREE CONSULTATION

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.

FREE CONSULTATION

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.

FREE CONSULTATION

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.

FREE CONSULTATION

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.


FREE CONSULTATION

Debt Consolidation vs Debt Settlement

Debt Consolidation vs Debt Settlement

The average American carries around a balance of $6,375 in credit card debt alone. That is an increase of 3% from last year.  In 2017, total credit card debt held by Americans reached $1 trillion. If you have a lot of credit card debt and are looking for a quick way out, you are not alone. You’ve probably seen several terms – debt consolidation, debt settlement, and bankruptcy. These can sound similar, and each one has its unique pros and cons. We’ll look at the first two in more depth and then compare the pros and cons to bankruptcy.

What Is Debt Consolidation?

Debt consolidation takes all your debts and rolls then into one. You then take out a loan and pay off the debts. You then pay off that loan through monthly payments. In order to get a loan, you’ll probably have to have some sort of collateral. The goal is to get a reduced interest rate and lower monthly payments. Debt consolidation is best for people who are only making minimum payments.

Since most debt consolidation plans involve loans, you may have additional fees like origination fees or closing costs. Those fees can add quite a bit to your existing debt.

Contact Pacific Debt today for your FREE consultation and Savings Estimate

Debt Consolidation Pros and Cons

Pros

  • Reduce the number of bills
  • Lessens chances of falling behind on bills
  • May be able to get lower monthly payments and interest rates

Cons

  • No control of spending habits – if you don’t reduce spending you will never eliminate debt
  • Debt is not forgiven or even reduced
  • Can take 3–5 years in a debt consolidation program to eliminate debt

Types of Debt Consolidation

There are several types of debt consolidation. These include a debt management plan (DMP), balance transfer on credit cards, personal loans, or home equity line of credit (HELOC).

A debt management program includes credit counselling and education programs. They can take a long time – up to 5 years – to complete. You will learn the roots of your financial problems and how to manage them.

Balance transfers on credit cards allow you to transfer your existing balances to a lower interest card. This sounds great except that 0% balance cards are hard to get. If your credit score isn’t over 700, you probably won’t get one. In addition, balance transfers come with a transfer fee of 2-3% on the balance and an expiration date of 12 to 18 months on the lower rate. Interest rates can then increase to more than your initial card.

Personal loans can be hard to get if you have a high debt-to-income ratio. You may end up with an origination fee, a prepayment penalty, and may need to have collateral (your car, home, etc.).

HELOCs have low interest rates but your home is the collateral. If you don’t make the payments, you could lose your house. Since it is a loan, you may have to pay application fees and closing costs as well.

Does Debt Consolidation Hurt Your Credit?

Debt consolidation can hurt your credit score and report. Taking out a loan requires a “hard pull”

on your credit report. This will lower your credit score for a bit. It can lower your credit utilization ratio if you open a new credit card and transfer all your balances to it.

What Is Debt Settlement?

In debt settlement, you negotiate with your creditor to lower the amount you owe. If negotiating is not in your skill set, there are companies like Pacific Debt, Inc. that specialize in negotiating with creditors and have an excellent track record in debt negotiation services. The secret to debt settlement is that you have to stop paying your bills in order to make creditors willing to negotiate. This action can come with late fees and creditor phone calls.

Debt Settlement Pros and Cons

Pros

  • May be able to pay less than you owe
  • Last resort before bankruptcy
  • One low monthly program payout
  • Faster than Debt Management
  • No credit requirements or collataral

Cons

  • Annoying phone calls from creditors
  • Short term impact on credit score and credit report for up to 7 years
  • Possible tax consequences
  • Risk of creditor lawsuit

Does Debt Settlement Hurt Your Credit?

Unfortunately, debt settlement does come with some credit score and credit report damage. Your late payment history may stay on your credit report for up to seven years. You should consider debt settlement for debts that are very delinquent or already in collections or if you are struggling to even pay the minimum. That way the damage is already done to your credit score.

What’s the Difference Between Debt Consolidation and Debt Settlement?

The quick answer is that in debt consolidation, you take out a loan to pay off all other bills, then pay off the loan. In debt settlement, you negotiate with creditors to lower what you owe. When comparing debt consolidation vs debt settlement, take into consideration the effects on your credit score, the fees charged in each case, how long the program will last and how delinquent your debt.

Bankruptcy

Bankruptcy is a legal action to have your debt erased. Bankruptcy is a last resort. It can stay on your credit report for up to ten years. It is also legally complex and expensive. In debt consolidation vs bankruptcy vs debt settlement, always try debt consolidation or debt settlement first.

About Pacific Debt, Inc

Unlike credit counseling agencies or debt consolidation companies, Pacific Debt’s main objective is to eliminate your debt completely. If you successfully follow our program, you may be debt free in 2 to 4 years. To be eligible for the Pacific Debt settlement program, you must have more than $10,000 in unsecured debt

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.


Pacific Debt has helped thousands of people reduce their debt. Since 2002we’ve settled over $200 million in debt for our clients. Contact us today to see how we can help.


The Best Debt Reduction Service for Credit Card Debt

Best Debt Reduction Services for Credit Card Debt

The holidays are over and bills are rolling in. You spent way too much money Christmas shopping and your credit card debt has reached critical limits. If this is you, you’re not alone!

Most of us rack up ridiculously high credit card balances during the holidays. Now that the new year nears, you’re seeing the full financial aftermath of Christmas.

This is a great time to start on your most important New Year’s resolution- reversing your credit card debt. Get started now. It can’t happen fast enough!

The good news is that you have several debt reduction services at your disposal. The bad news is that there is no quick-fix and options may come with negative (but short-term) consequences to your credit score.

What is a Debt Reduction Service?

A debt reduction service helps you find legitimate solutions to effectively reduce debts. There are three basic types of services – credit counseling, debt consolidation, and debt reduction. Only one, debt settlement, helps you negotiate with creditors to reduce debts by up to 50%.

What are the Different Types of Debt Reduction Services?

There are three main approaches to debt reduction services. Keep in mind that none of these are perfect and each may have a negative effect on your credit rating.

  1. Consumer Credit Counseling – These companies help you investigate assistance programs that help you reduce debt. They may help you qualify for these programs too. Credit counseling is not a debt reduction program because most agencies usually only help you reduce your future interest.
    1. Debt Consolidation – Debt consolidation consolidates debts into one easy monthly payment. It doesn’t really reduce debt, it just revises your account structure. In most cases, debt consolidation actually increases the term length, so you end up paying more.
  1. Debt Settlement – Debt settlement works directly with creditors to settle debt for less than you owe. As part of the program, you accrue money in a 3rd-party escrow account. Once you have a certain amount in that account, debt settlement experts negotiate on your behalf to decrease your debt by up to 50% and pay off that debt completely. Debt settlement isn’t a quick fix. It usually takes from 2-4 years to complete.

Your debt settlement expert will guide you through the process and be in regular contact to help you through this difficult and confusing process. You have the responsibility to put aside money and forward all collections notices and bills and any harassment details to your debt settlement expert.

The Pros of Using a Debt Settlement Program

Using a debt settlement program can help you in many ways. The pros include:

    • Settling your debt for less than you currently owe. In most cases, the debt settlement company will help you settle your debt for up to 50% of your balance, depending on the creditor and their policies.
    • Guidance by a dedicated debt expert through the difficult process. In most cases, the debt settlement company has a long business history with your creditor, leading to a smoother negotiation process.
    • Avoiding bankruptcy. Debt settlement is a bankruptcy alternative and is the last resort before declaring bankruptcy.
    • Avoiding the stigma of declaring bankruptcy.
  • Ultimately saving money.

The Cons of Using a Debt Settlement Service

    • The program isn’t quick and usually takes anywhere from 2-4 years to complete.
    • The account will generally appear on your credit report as settled for less than full balance.
    • You’ll probably encounter harassment by collection companies, ranging from scary phone calls to legalese-laden letters. Your debt settlement account manager guides you through this process to help make things easy for you.
  • Since there are fraudulent companies, make sure you research debt settlement companies and choose a reputable company like Pacific Debt, Inc.

Who is the Best Debt Settlement Company to Work With

Debt settlement can be scary and involve a lot of legalities and headaches. We recommend that you work with a reputable company, like Pacific Debt, Inc., that has positive reviews from both organizations like the BBB and from clients. Pacific Debt, Inc. has settled over $200 million in debt for their customers since 2002 and our ratings prove how effective our program can be.

    • A+ rating from the BBB with accreditation and certification
    • Ranked  as one of The Best Debt Settlement Companies of 2018 and 2019 by US News and World Report
  • 4.8 star rating by BestCompany.com with over 1000 client reviews available online.

For more information, talk with one of our debt specialists today.

FREE CONSULTATION

If you are ready to reverse your debt, contact Pacific Debt, Inc to see if you qualify for our debt reduction program. The consultation is absolutely free and there is no obligation if our program doesn’t seem like a good match for you. You have nothing to lose.

See if you qualify for the Debt Settlement Program from Pacific Debt Inc. Start saving money today.

Disclaimer: We are not attorneys or accountants and can not give you legal advice. If you have legal or tax questions, you should contact the appropriate expert.

How to deal with debt collectors when you can't pay

How to Deal With Debt Collectors When You Can’t Pay

If one of your debts has gone to collections, you will hear all sorts of things from the person on the other end of phone call. Not everything they are telling you is true. Here is what happens if you don’t pay a collection agency and some of your options to end the constant calls.

Ending Up at Debt Collection

If you have not been able to pay your debt for the last three to six months, the creditor may sell your debt to a collection agency. At that point, you no longer deal with that original creditor and your credit report will note that you have been sent to collections.

You still owe the entire amount. If you absolutely can’t repay the entire amount, the collections agency would rather collect some money than nothing. This may allow you to negotiate a deal.

Will it hurt your credit to negotiate? Yes, but so will defaulting on a debt.

Chat with one of our debt experts today to find out more about our debt relief program.

What to Expect If You Don’t Pay

If you cannot pay a debt collector, the following may happen:

  • You’ll be reported to credit bureaus, damaging your credit and ability to get loans
  • Someone will write or call you regularly
  • Assets may be repossessed or a lien placed on it – home, car, rent-to-own items, etc.
  • You may be sued – always respond!
  • You may be reported as in default or delinquent
  • You may end up at a different collections agency

Working with A Collection Agency or Debt Collector

The first and most important thing to know is that you have federally guaranteed rights and many states have similar rights. Here is what a debt collector cannot do under the Fair Debt Collection Practices Act (FDCPA):

  • Contact you between 9 p.m. and 8 a.m. without your permission
  • Threaten violence or using profanities when speaking to you
  • Contact third parties (family, friends and employers) about your debt or otherwise embarrass you
  • Speak to your employer except under limited conditions
  • Pretend to be a government official or an attorney
  • Send letters that look like attorney or governmental letters but that are not
  • Send derogatory messages about you to a credit reporting agency
  • Send information on a postcard or via social media
  • Attempt to collect an expired debt
  • Hire an unlicensed credit collection agency
  • Communicate with you if you are represented by an attorney

There are a few things that you SHOULD NOT do:

  • Make a good faith payment. This payment can restart the expiration clock
  • Be rude to a collector. It can work against you if the phone calls are replayed in court
  • Let your contact information get out-of-date (the debt collection agency can contact third parties to track you down)
  • Admit that it is your debt or promise to pay – it can be construed as a contract
  • Give out financial information like your social security number or the value of a property

There are things you SHOULD do:

  • Take notes when you speak to a debt collector. Write down date and time, debt collector name, which debt, and what the debt collector says
  • Keep all mail, copies of texts, etc
  • Tell the collector if you legitimately can’t pay. They may try to work with you
  • Tell the collector if the debt is not correct
  • Give them your current contact information
  • Consider telling the collector to stop contacting you. If you want to work towards a settlement, you may not want to take this step

Speak to one of our debt experts right away to find out more information

What Steps Can You Take Once in Collections?

There are several options to get a debt collector to go away.

Ignore the debt and calls. You may end up in court or the collectors may give up. This is not a good option.

Set up monthly payments – Because the debt collector bought the debt for less than it is worth, they may be willing to negotiate. If you want to try this, offer to pay 40 to 50% of the total amount. Make sure the get the following in writing:

  • The amount you agree to repay and what you are repaying – are you paying against what you owe or settling the bill once you pay
  • The name of the debt – make sure you are paying off what they think you are paying off.
  • The collection agency should have the name of the original creditor and account number.
  • The exact day the payment is due.
  • The exact name of the collection agency since debt can be sold
  • The effect on the account after payment. Will it be reported to a credit agency, etc.

Debt consolidation requires you to take out a loan to pay the original debt. It may not be possible to get a loan if you are in collections.

Debt management includes working with a credit counseling agency to learn to better manage money and pay off debts

Bankruptcy is a last resort to handle your bills. It is expensive and you need legal advice and representation.

Debt settlement includes signing up with a debt settlement company like Pacific Debt, Inc. If you qualify, a debt settlement company with negotiating with your debtors while you build a fund to begin repaying debts. You can also do this on your own, but it takes determination.

Pacific Debt, Inc.

Pacific Debt, Inc offers a free consultation. Our debt specialists will perform an in-depth analysis of your debt and advise you on your options. They ensure that you understand all options and all the program details.

Depending on your financial situation, Pacific Debt, Inc works with you to have you debt free in one to two years. We do not make money unless your debt relief program works for you. You have nothing to lose and every to gain by contacting Pacific Debt for your free consultation.

For more information, talk with one of our debt specialists today.

FREE CONSULTATION

What is a good debt to equity ratio?

What is a Good Debt to Equity Ratio?

What is a good debt to equity ratio? Debt ratio is one of those terms that get thrown around when looking for loans. What is debt ratio and what does it mean for you and your debt? There are a couple of ways to look at debt ratio, but first, we need some definitions of what actually is a good debt to equity ratio.

What is Equity?

Equity, for people, is what you have that is worth money or that has grown in value. Homes are the most common types of equity. If you have a mortgage of $150,000 and the house is valued at $200,000, you have $50,000 in equity.

Cars and boats generally don’t have equity as they lose value over time. Stocks, jewelry, artwork, and similar items may or may not have equity. It depends on how much you bought it for and how much someone is willing to pay for it.

If you are would like more information on what a good debt to equity ratio is, contact us for your FREE consultation today. See how much money you can save with our debt settlement program.

What are Assets?

An asset is like equity but includes your after-tax income. We are going to use asset and equity to mean the same thing.

What is Debt?

Debt is what you owe. Loans, credit cards, mortgages, student loans, and similar items feed into debt.

What is Debt to Equity Ratio?

A ratio compares one value to another. The debt to equity ratio compares how much debt you have to how much equity you have. The formula is below. Feel free to use the equation to find what your good debt to equity ratio is.

what is a good debt to equity ratio image

If you owe $100,000 and have total assets of $200,000, you have a debt ratio of ½ or 0.5 or 50%. If you have total debts of $200,000 and equity of $100,000, you have a debt ratio of 2 or 200%. The lower the debt to equity percentage, the better you are situated.

Why Do I Need A Good Debt to Asset Ratio?

Most lenders use debt to asset ratio as a clearer look at debt to equity ratio. This adds in your after-tax income for a better idea of how easily you can repay your debts.

You can figure out debt to assets two ways. The first is all debt except mortgage. The second is with a mortgage. Let’s break it down with some numbers.

Without mortgage: Add together all debts (loans, credit lines, credit cards, etc.) and divide by after tax income. Let’s say you have $10,000 in debts and an after-tax income of $59,000 (the median US income). Your debt ratio is 0.17 or 17%.

With mortgage: Add together all debts plus the total of 12 monthly mortgage payments and divide by after tax income. Now you have $10,000 in debt plus $12,360 (based on US averages) in mortgage payments. Your debt ratio is now 0.38 or 38%.

What is a Good Debt to Equity Ratio?

Now that you have some numbers, what do they mean? The ideal debt to equity ratio, using the formula above, is less than 10% without a mortgage and less than 36% with a mortgage.

If you exceed 36%, it is very easy to get into debt. Most lenders hesitate to lend to someone with a debt ratio over 40%. Over 40% is considered a bad debt equity ratio for banks.

High and Low Debt Ratios

When you look at debt to equity ratios, a high ratio means you probably don’t have enough equity to cover your debts. A low ratio means you can take advantage of your equity to take out loans if you want.

How to Improve your Debt Ratio

Possibly the easiest way to improve your debt ratio is to pay off debt. If you have credit card debt in excess of $10,000 and are having trouble paying it down, Pacific Debt, Inc may be able to help you out.

Contact one of our debt specialists for a free consultation.

For more information, talk with one of our debt specialists today.

FREE CONSULTATION

Disclaimer: We are not attorneys or accountants and can not give you legal advice. If you have legal or tax questions, you should contact the appropriate expert.

Refferences

https://www.investopedia.com/terms/d/debtratio.asp
https://finance.zacks.com/personal-finance-debt-ratio-6256.html
https://www.cnbc.com/2017/10/27/what-average-or-middle-class-american-means-matters-more-than-ever.html

Is Debt Settlement A Good Idea?

Is Debt Settlement A Good Idea?

When you are in debt, you have several options. Bankruptcy, consolidation, settlement, credit counseling, and ignoring the whole mess are all options. What is the best one for your situation? In this article, we’ll take a look at debt settlement.

What is Debt Settlement?

In debt settlement, you and your creditors reach an agreement in which you pay less than you owe. A debt settlement company like Pacific Debt can help you to settle your credit card debt and learn to live debt free.

How Do I Settle?

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.

Once you convince them that you are unable to pay your debt, they may be more willing to reach a debt settlement agreement. Pacific Debt has an excellent track record of settling accounts and knows which creditors are most like to settle.

Some creditors will insist that you settle in full. Others will settle for far less than you owe.

You will make lump-sum payments to eliminate each debt.

I Don’t Have Money for a Lump Sum Payment

Most people don’t have a savings account large enough to cover their debts. If you did, you’d pay off your debts upfront. Pacific Debt has a solution.

Pacific Debt will set up an escrow account that you deposit money into regularly. Since you will not be paying on your debt, you take that money and set it aside. As it builds up, you settle each debt as you have funds.

How Long Does Debt Settlement Take?

Depending on how much you owe and how much you can set aside, debt settlement can take between 2 and 4 years.

How Much Debt Do I Have to Have?

Pacific Debt requires you to have $10,000 in unsecured debt, generally credit cards, and be unable to make more than minimum payments.

Many people panic when they hit a $15,000 credit card debt amount. Since that is more than most Americans earn in 3 months, a $15000 credit card debt is frightening. Pacific Debt can help.

Can I Settle Student Loan Debt?

Yes, you can settle student loan debt. However, it is not easy. Federal student loans have three options to settle student loans. All three come with a big catch.

  • Option 1 – pay off current balance plus accrued interest
  • Option 2 – Pay the total principal and half of the interest balance
  • Option 3 – Pay 90% of the total principal and balance owed

What is the catch? You must make a lump sum payment within 90 days.

Pacific Debt can work with you or refer you to a trusted partner who can help settle student debt. Get your free debt settlement consultation today.

What are the Drawbacks to Debt Settlement?

If this sounds too good to be true, good for you for thinking about the drawbacks! There are several and these should play into your decision making.

When you stop paying on your debt, your credit score will take a hit. It generally recovers as you pay back your debts. The fact that you settled will show up on your credit report. It can take up to seven years to remove a debt settlement notation from your report.

You may be sent to collections. This comes with its own set of annoyances, from phone calls to letters. Once you have convinced creditors that you are serious about settling, creditors generally settle.

What are Pacific Debt’s Settlement Steps

First, you need to enroll and get a free consultation. You will be given options that may work for you. Choose the best solution for your unique situation.

Next, stop making payments on your unsecured debt. Pacific Debt will help you set up an FDIC insured Special Purpose account. You will make deposits into that account every month.

While the balance grows, Pacific Debt negotiates with your creditors. Your account manager will be in contact every few weeks. As your account grows, your settled debt will be paid off.

It takes about 24 to 36 months.

If you only want to improve your credit scores or lower interest rates, debt settlement is not the way to do it.

If you have questions, contact us today.

For more information, talk with one of our debt specialists today.

FREE CONSULTATION

Disclaimer: We are not attorneys or accountants and can not give you legal advice. If you have legal or tax questions, you should contact the appropriate expert.

Should you file bankruptcy because you cant pay your credit card bills?

Should You File Bankruptcy Because You Can’t Pay Your Credit Card Bills?

Americans collectively have $1 trillion in revolving debt balances – most of that is credit card debt. If you are one of the millions of Americans with credit card debt, know that you are not alone. It might not help, but misery does love company!

If you are having trouble paying your credit card bills, you are probably looking for a solution. Bankruptcy might seem like a great option. You might get your debt wiped out and be able to start over again.

Before you decide on bankruptcy, check out your options very carefully. Bankruptcy has some serious consequences.

Is Bankruptcy an Option?

There are two forms of consumer bankruptcy. Chapter 7 is designed for people who absolutely can not pay their bills. You must pass a means test and earn under your state median income for your family size. Chapter 13 is for people with a steady source of income and specific amounts of unsecured and secured debt.

For some people, bankruptcy is the only option. If you owe more than you can realistically pay off, you may need to seriously consider bankruptcy.

Bankruptcy can provide immediate debt relief and puts an immediate stop to the harassment. In some cases, all of the unsecured debt is forgiven, and you get a “clean slate.”

Pros of Bankruptcy

  • Stops Bill Collections – No more collection calls and letters.
  • Eliminates Credit Card Debt – Depending on the BK you file, all your debts could get wiped away.
  • Allows the opportunity to start rebuilding your credit – Enjoy a fresh financial start!

Cons of Bankruptcy

  • Damaging to your Credit – Your credit rating takes a hit after you file a bankruptcy. It stays on your credit report for 7-10 years depending on the type of bankruptcy that was filed.
  • Cost of Filing and Lawyers – Bankruptcy can be expensive. There are filing fees, and lawyers can cost thousands of dollars. Make sure to check all your options carefully.
  • Physical and Mental Drain – Until your bankruptcy is finalized, you’ll still get creditors’ harassing phone calls and threatening legal letters. Many people agonize over the stigma of bankruptcy.
  • New Credit and Loans – Your credit will probably take a severe hit. You will, at some point, need to start rebuilding your credit. It’s very difficult to get approved for new loans with a bankruptcy on your credit history.

If bankruptcy appears to be your only option, you may be a candidate for debt settlement. Pacific Debt may be able to help you avoid bankruptcy while getting out of debt.

For more information on debt settlement, talk with one of our debt professionals.

FREE CONSULTATION

Is Debt Settlement a better option than Bankruptcy?

Debt settlement is a last resort to filing a bankruptcy. First, what is debt settlement? In debt settlement, you negotiate with your creditor to agree on a reduced balance. Pacific Debt is one of the leading debt settlement companies in the United States. We will negotiate with your creditors while helping you learn to live debt free.

Pacific Debt can help you if:

  • Have more than $10,000 in unsecured debt (generally credit card debt)
  • Live in a state where we do business
  • You are having difficulties making minimum payments

Pacific Debt is not for you if:

  • You want ONLY to improve your credit score
  • You ONLY want lower interest rates
  • You can make more than minimum payments and have a good credit score

Is debt settlement a better option than bankruptcy? It depends on your unique situation but here are some points to take into consideration.

  • Do you only make minimum payments on your credit cards?
  • Do you use credit cards to pay for necessities?
  • Are you using one credit card to pay off another?
  • Are bill collectors calling or creditors suing you?
  • Are you in danger of foreclosure?
  • Are you thinking of withdrawing 401K monies to pay your debt?
  • Have you lost your job?
  • Do you have a lot of medical bills?
  • Are you getting a divorce?

If you answer yes to any of these, you may be a candidate for debt settlement.

For more information on debt settlement,
talk with one of our debt professionals.

Who Can Help me with Debt Settlement?

Pacific Debt is a Debt Relief Provider with over 15 years of experience. Pacific Debt offers debt relief solutions tailored to your unique situation and budget. Our certified counselors help you work up a budget and  explain your options to you

  • Accredited by the Better Business Bureau with an A+ Rating
  • Rated 4.5/5 stars by ConsumerAffairs.com (over 450 verified reviews)
  • Rated 5/5 stars by TrustPilot based (over 400 verified consumer reviews)
  • US News and Report  – named Pacific Debt as One of the Best Debt Settlement Companies of 2018

Pacific Debt has helped thousands of people reduce their debt. We have settled over $250 million in debt for our clients since 2002. Contact us to see how we can help you.

How do I get started and how long will it take?

Once you make the decision to get out of debt, you apply through our website. You’ll be connected with a certified debt relief specialist who will review all your options. If debt settlement is right for you, we move forward on getting you enrolled.

If it is not, we refer you to one of our Trusted Partners who can help you with other options.

As you enter our debt settlement program, your certified debt relief counselor will analyze your debt, monthly expenses, and your income. They look at your current budget and determine a payment estimate that works for you. They then work with your creditors to agree on a lesser amount of debt and a repayment schedule. An Account Manager will be with you every step of the way.

For more information, talk with one of our debt specialists today.

FREE CONSULTATION

Disclaimer: We are not lawyers and are not giving legal advice. We strongly recommend speaking to a professional before making any decisions.

References
https://www.cardrates.com/advice/credit-card-debt-statistics/
https://www.debt.org/bankruptcy/should-i-file/

BACK
Free Consultation
close slider

See How Much You Can Save


Start saving today! Get a personalized plan from Pacific Debt, the leader in debt relief with an A+ Rating from the BBB.


How much debt do you have?

Click to estimate

See Savings

100% free savings estimate and will not affect your credit