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FAQ

We have found that once someone becomes a Lexington client, there are often questions that arise about the settlement process. For many people, debt settlement is a new concept and totally different than all other programs out there. The questions and answers below will help you better understand Lexington’s Debt Settlement Program. Again, please contact your Debt Specialist with any questions that are not answered here.

Frequently Asked Questions About Debt Settlement

Q1. Who is qualified for our program?
Q2. Who is NOT qualified for our program?
Q3. How do you apply?
Q4. How will you settle my debts?
Q5. Is bankruptcy a better option for me?
Q6. Does Debt Settlement have a negative impact on my credit?
Q7. Can I still use my credit cards?
Q8. Will interest and fees continue to accumulate?
Q9. What will I pay for your services?
Q10. Do you guarantee that you will settle all of my debts?
Q11. Can I be sued?
Q12. Can you stop my creditors from calling?
Q13. Does this repair my credit
Q14. Can creditors garnish my wages?
Q15. What are the tax consequences?
Q16. Can't I negotiate my debts with my creditors on my own?
Q17. Why are my creditors still calling me?
Q18. Will I still receive monthly statements from the creditors, and will they still charge interest and late fees?
Q19 Are all the accounts settled at the very end of the program?
Q20. Can I shorten the program for the settlement of my accounts?
Q21. What should I do with any letters or correspondence I receive from my creditors or collection agencies?
Q22. Who controls the monthly savings account allocation to ultimately settle the accounts with my creditors?
Q23. Are you making payments to my creditors?
Q24. Will creditors call me?
Q25. Will this affect my credit report?
Q26. Do you hold onto my settlement funds?
Q27. Do I receive a 1099 after my account settles?


Q1. Who is qualified for our program?

A. A debt settlement program is only for people facing financial HARDSHIP. This means people who are late on paying their debts, have little or no ability to pay their debts in the future and are facing a possible bankruptcy.


Q2. Who is NOT qualified for a debt settlement program?

A. This program is not designed to negotiate debts for people who have reasonable means to pay off their debts. If you have the ability to pay your debts in the normal fashion, then you should honor your debts and do so. This program is NOT for people who have high credit ratings and can meet their monthly debt obligations.


Q3. How do you apply?

A. Complete the form online. A debt consultant will review your information and call you to review your situation. After a debt consultant has reviewed your financial situation and hardship they will determine if you are qualified for our program.


Q4. How will you settle my debts?

A. You will be asked to put aside and save a set amount of settlement funds on a monthly basis. This amount will be determined in your initial analysis based on total amount of debt and will be in line with your income and expense budget. Each person's situation is different and the negotiation process will begin at different times depending on the amount of your debt and your ability to save funds.. Once the creditors agree to a settlement amount, we will present this offer to you. If you approve of the settlement, we will instruct the creditor to fax over the 'settlement offer' in writing and notify you, so that you can release funds to the creditor.


Q5. Is bankruptcy a better option for me?

A. Anyone considering our program should also contact a bankruptcy attorney to determine if their situation warrants filing for bankruptcy. Using the Debt Settlement process does not guarantee that you will not have to file for bankruptcy in the future.


Q6. Does Debt Settlement have a negative impact on my credit?

A. YES. Your credit score will decline due to entering this program. How much it will decline depends on your original circumstances. Most of the accounts you place into negotiation are likely to "charge off", which will reflect negatively on your credit. When a settlement is complete the creditor should notify the credit bureaus that the account has been settled.


Q7. Can I still use my credit cards?

A. NO. All credit cards in the program will not be active and you will not have credit privileges. Any cards you DO NOT put into the program should not be used. This program is for you to get out of debt.


Q8. Will interest and fees continue to accumulate?

A. Yes, Interest and Fees will continue to accumulate for a period of time.


Q9. What will I pay for your services?

A. You will pay a fee which is calculated based on the total amount of debt enrolled. All costs and fees are always fully disclosed and you are required to sign for approval before you commit to our program.


Q10. Do you guarantee that you settle all of my debts?

A. NO. There is no guarantee that your creditors will negotiate with us or that your debts will be reduced.


Q11. Can I be sued?

A. YES. Your creditors certainly have the right to sue to recover their money. A. Lawsuits are far less common in debt matters than most people think. Some people may fall behind and not make payments to their creditors for years and never hear from a single attorney. Of course, the bank has the right to sue you to recover their money. Generally, however, the banks would much rather work out a solution than sue. Lawsuits are very costly for creditors. Lexington Financial Solutions is not a law firm; nor are we your attorney. However, we do have a very good understanding of how the whole process works. In most situations, a creditor sues because they want action on that account. Less than 2% of our clients' enrolled accounts have lawsuits against them. Our Settlement Team is still able to achieve options and/or a settlement from the creditor who decides to sue. Do not let lawsuits or the threat of a lawsuit intimidate you, but rather use them to your advantage. Lexington can still call the law office or attorney to work negotiations for a settlement. Of course, please save any and all correspondence you receive from your creditors and forward a copy to your Customer Care Representative immediately. Please remember, when faxing correspondence to Lexington, you must include a cover sheet noting Attention: Your Customer Care Rep's Name. Also, please remember to include your name and telephone number.



Q12. Can you stop my creditors from calling?

A. NO. Your creditors have every right to try and contact you in order to collect a debt. If your account is in collections; collection agencies have to adhere to the FDCPA Guidelines. If you would like to learn more please read Fair Collection Practices Act. This defines when and how a creditor may contact you.


Q13. Do you repair my credit?

A: NO. Companies cannot remove legitimate negative items from your credit report. Negative items will remain on your credit report according to the conditions imposed by the credit reporting agencies. The goal of a Debt Settlement program is to settle your delinquent accounts. When a delinquent account is settled this is reflected on your credit report.


Q14. Can creditors garnish my wages?

A. YES. The creditor first has to sue you, successfully obtain a judgment, and then file for a garnishment action.


Q15. What are the tax consequences?

A. Your creditors will report cancelled/settled debts exceeding $600 to the IRS and you are required to report the same as income on your annual tax return. However, the IRS permits you to write off any "income" from canceled debts up to the amount by which you were "insolvent" at the time. You need to consult your own tax advisor for advice specific to your situation.


Q16. Can't I negotiate my debts with my creditors on my own?

A. YES. You can negotiate your debts with your creditors on your own. As a matter of fact if you successfully negotiate a debt it may cost you less in the long run to use this approach than to use our services.


Q17. Why are my creditors still calling me?

A. The Fair Debt Collection Practices Act (FDCPA) specifically addresses third-party debt collectors and does not necessarily apply to the original creditor. The FDCPA entitles the originator to contact the debtor regardless of a request to cease verbal communications. However, a vast majority of creditors will honor the request as soon as they can process the request into their systems. American Debt Control will fax or mail a "Creditor Engagement Notice" in order to help cut down on some of the calls from your creditors. Again, there are a few creditors we choose not to contact right away so we can get you a better deal on the settlement when funds are available. If this is the case, you will still receive calls from these creditors. The best ways to cut down on these calls are to: (1) change your number to unlisted, giving it only to friends and family, (2) use your caller ID or answering machine to screen calls or (3) try some sort of an auto-dialer gadget (such as Telezapper) for those nasty direct-caller creditors. A Call Log will be supplied so you can keep track of which creditors continue to call. Once you have it filled out, you can mail or fax it in to your Customer Care Representative. Please be patient and let the process take its course.


Q18. Will I still receive monthly statements from the creditors, and will they still charge interest and late fees?

A. YES. Most creditors will continue to send statements as long as the debt is outstanding. Once an account is settled, you will no longer receive statements. We ask that you only send in statements in the beginning of the program to verify balances. You do not need to continue to send in statements. We only need collection letters. Your creditors will also continue to charge interest and late fees as another form of intimidation to keep you doing exactly what they want – sending payments to them every month for the next 20–30 years. When American Debt Control begins the settlement process, your Settlement Advisor will negotiate everything at that time.


Q19. Are all the accounts settled at the very end of the program?

A. NO. You will use your personal savings fund to settle each account, one at a time throughout the program, as soon as you indicate to us you have sufficient funds available for American Debt Control to begin negotiations. Our Settlement Advisors may sometimes contact you before you have the necessary funds available to see if you might be able to come up with monies for outstanding settlement offers. Your Settlement Advisor will assist you in deciding on the accounts and in the order that is the best for your situation. If you ever do come into funds faster than what the program lays out, this is always a good thing and will only help you get out of debt faster.


Q20. Can I shorten the program for the settlement of my accounts?

A. YES. The pace of the settlement is based on the availability of funds. If you are able to come up with additional funds such as 401(k)s, loans from family members, garage sales or selling assets, you can settle your debts in a shorter time frame. It is to your advantage to do so. You can also shorten the program by disciplining yourself to add more money to your monthly savings account. REMEMBER, all of the settlement funds are in YOUR personal savings account, and YOU have complete control over any funds deposited into the account. The faster you accumulate funds in that account, the faster American Debt Control can begin settlement negotiations. Also, if you have funds right at the beginning, remember, your accounts must age a bit before they are ready to settle. Please be patient and let the process run its course.


Q21. What should I do with any letters or correspondence I receive from my creditors or collection agencies?

A. Some of the letters you receive require a response from our office and are time-sensitive material. Others may not be as time sensitive and may not require any response. Therefore, any written correspondence you receive should be immediately forwarded to your Customer Care Representative for a determination of the required reply, if any. When in doubt, FAX it over! Let us take a look at the letter, and we will respond or assist you in responding accordingly.


Q22. Who controls the monthly savings account allocation to ultimately settle the accounts with my creditors?

A. You do! The account is maintained and set up by you at your own bank. This account can be an existing account or a new account, whichever is most convenient for you. You will need to discipline yourself to add the required funds into your personal savings account each month of the program. Once funds start to accumulate in that account and you have let your Customer Care Representative know of the amount you have in that account, your Settlement Advisor will start working negotiations. Once we get offers, we will call you for final approval. If you agree to the settlement amount, American Debt Control will request a settlement letter for the dollar amount agreed upon in order to settle your outstanding balance. You will then use the funds from your personal savings account to send the creditor certified funds, checks by phone or cashier's checks for the agreed-upon final amount. Typically, the creditors will require these funds to be in their office within seven to ten business days from the receipt of the settlement offer, some faster. Your Settlement Advisor will discuss the particulars of each settlement as they occur.


Q23. Are you making payments to my creditors?

A. No. When you choose to settle a debt, versus paying the balance in full, a creditor will only negotiate on an account that is in a past-due status. You have a personal account where funds accumulate, and we use those funds to negotiate settlement on your behalf. Monthly payments are not sent in to your creditors; they are receiving an agreed-upon lump-sum cash settlement once your funds are available.


Q24. Will creditors call me?

A. The hard truth is yes. You do owe them money so they have every right to call. Now there are things you can do to handle these calls. A good majority of our clients change their home number. Calls start to decrease around month five of the program. There are some creditors that are contacted right away, and some are contacted at a later date. In our experience, we handle different creditors at different times to save our clients as much money as possible through settlement.


Q25. Will this affect my credit report?

A. Honestly, anything you do will affect your credit report. This is hitting the unsecured payment-history side of your credit report. If you're in a situation where you are having trouble paying your bills or the debt is so overwhelming that you just don't ever see a way out, then debt settlement is a good option for you. If you are at the point where you're considering an option to settle your debt, then your credit report shouldn't be a concern until your debt is addressed. You have to weigh what keeps you up at night, a good credit report or the credit card debt.


Q26. Do you hold onto my settlement funds?
A. As members of TASC, we are not allowed to hold clients' funds. We have our clients set a personal account where funds start to accumulate, and we use those funds to settle our clients' debts. By holding on to your own funds, our company name doesn't show up on your credit report like Credit Counseling services do. You are in control of your funds.


Q27. Do I receive a 1099 after my account settles?

A. If the savings is more than $600, then yes, you will receive a 1099. You will need to seek the advice of a tax expert. However, with a good majority of our clients, they are insolvent, which means they have more in unsecured debt than they do in assets. Again, seeking advice from a tax expert is the best way to go.


Disclaimer
Lexington Financial Solutions does not provide legal, tax or investment advice. If you need legal advice, legal expertise, court filings or tax assistance, you must seek the advice of a licensed attorney or CPA. Individual results may vary.

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Copyright © 2009 Lexington Financial Solutions
** results may vary and are dependent upon several factors including individual circumstances, creditors' willingness to settle, successful completion of program and ability to save funds. Lexington Financial Solutions does not assume or pay any debt, nor does it provide legal advice or offer credit repair. Settlement estimates of 50% are examples of past performance of settled accounts and do not take into consideration our service fees or potential tax consequences. Program not available in all states. Read and understand contract terms before enrolling.