Questions and Answers
The PBS program is intended for individuals that have experienced setbacks in life, struggling financially or no longer able to maintain the necessary payments on their unsecured debt. As with any program, the benefits, such as avoiding bankruptcy, being debt free, having cash to live on and the peace of mind that comes with completing our program, need to be balanced against the possible negatives. Please read through the following questions and answers so that you will be fully informed.
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1) Why should I read through all of these questions and answers?
2) How do you reduce my debt and can you reduce ALL of my debt?
3) Why should I use PBS?
4) Who can this program help and can bankruptcy be avoided?
5) What happens in my free consultation?
6) What do debt consolidation loans do?
7) What happens when a settlement is made?
8) Can you stop creditor harassment?
9) How long will it take to settle my debts and when do you start settling?
10) Can you do this on your own?
11) Interest rates and late fees?
12) Can you keep you credit cards?
13) Is this legal?
14) Will you need to come up with a lump sum?
15) What types of debts do we handle?
16) Will you sell my name or address to outside parties?
17) What will happen to your credit report?
18) Will the creditors take legal action against you?
19) Will I owe money to the IRS for my reduced settlement?
1. Why should I read through all of these questions and answers?
It’s a good idea to be well informed so that you’ll know what to expect both positive and negative of a debt settlement program.
Additionally all negatives just like all benefits will not apply to every case. For example when you take your child to get their wisdom teeth extracted you sign a form stating that you understand that complications like infection, swelling, allergy to anesthetic, including the extreme of their jaw being broken, could occur during the procedure. Yet how many children have their wisdom teeth out safely every week? Some of the negatives are rare and some happen more frequently but either way you must be informed. For this reason we have included them in the Questions and Answers as well as the paperwork you sign when you become a client.
Wouldn’t it be good if your credit cards had come with similar disclosures?
Likewise some statements have to be made that are common sense but must be stated anyway just in case someone misconstrues the meaning. For example, some collapsible strollers and cribs now come with the warning: Remove baby before collapsing. And some plastic trash bags and plastic dry cleaning bags are printed with the warning: Do not place over nose and mouth. Similarly we have to make certain statements for your protection as well as ours.
So please read through the rest of this page and we can answer any additional questions you might have in your consultation.
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2. How do we reduce your debt and can we reduce all of your debt?
The debt is reduced through a series of negotiations with the creditor for a lower payoff of the balance owed. Your hardship and financial situation is explained and a mutually agreeable reduction of the debt is agreed upon. You approve all settlements before they are finalized and then pay this reduced amount to the creditor. This completely eliminates the debt so no further action can be taken by the creditor.
We do this several ways and at times the client may need to participate in the settlement process under our strict guidance. This depends on your particular creditors and the situation. The fee structure does not change no matter how long or short the negotiations take or the manner in which the settlement is done. On average we arrange settlements of around 30-50 cents on the dollar (not including other fees, etc.), some are lower and some may be higher.
Our goal is to arange mutually agreeable settlements with the creditors on all your unsecured debts. However, NO company, including ours, can promise or guarantee that all debts can be negotiated or reduced or that all creditors will work with them. We are persistent and do our best but there may be occasions when a debt cannot be reduced or a creditor will not negotiate with us. But that being said our goal to get you out of debt remains the same and we do not get paid for a particular debt unless we get a settlement on that debt.
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3. Why should you use PBS?
PBS is not paid by any other organization and is working only for you to eliminate your debts as quickly as possible. If we do not reduce the debt and save you money, we do not get paid a settlement fee. Additionally we never hold or handle your money so you remain 100% in control at all times.
Except for the initial set up/retainer fee, we get paid purely on our performance, based on a percentage of the debt that we eliminate. We charge amongst the lowest up front fees in the industry and no monthly service fees. This means we are motivated to settle your debts and get you out of debt as soon as possible.
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4. Who can we help with our program and can bankruptcy be avoided in all cases?
We can help anyone who has over $10,000 in debt and having difficulty making minimum payments to creditors, falling behind every month as well as people finding themselves in deeper trouble and exhausted with the stress and frustration that is connected with debt.
Our clients have legitimate financial hardships and generally would not qualify for other debt programs, such as consumer credit counseling or debt consolidation loans, etc. Despite their financial problems our clients want to avoid bankruptcy and find an alternative route out of their debt problems.
Note on bankruptcy: Our clients come to us already in trouble and other problems may arise while on the program. Although we do our best to help our clients who want to avoid bankruptcy through settling their debt, we cannot promise or guarantee that a client will not have to file for bankruptcy. (If you have questions about bankruptcy please seek legal advice.) However, we take on clients that we believe have a good chance of completing and hundreds have done so.
Call us for a free phone consultation to find out what we can do for you at (800) 404-8687.
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5. What happens in your free consultation session?
We review your financial situation and go over what happened to create you hardship, your debt, income and expenses and provide possible solutions to get you out of debt. We give you a rough idea on the sort of reductions we might be able to obtain from the creditors and an estimate of how long before you could be debt free. You will have the feeling that perhaps there is a way out of the stress and financial problems that you have been having.
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6. What do debt consolidation loans do?
Usually Debt Consolidation loans simply transfer the debt from one place to another and normally take an unsecured debt and change it into a secured debt. The fact is: you cannot borrow your way out of debt. About 65% of people who obtain a debt consolidation loan find themselves in deeper debt a few years later. The main problem with consolidation loans is that once you have paid off the credit cards you have a whole new source of spending power: empty credit cards.
It normally does not take long before these cards are maxed out again and you're in a worse financial situation. You end up not only having to pay back the cards but also the consolidation loan. If you start missing payments on the consolidation loan, you stand to lose the asset (usually your home) that the loan is secured against. Usually Debt Consolidation Loans are not a way out of debt, but a way into deeper financial trouble. We have clients that came to us precisely because of this situation.
There are times when consolidation loans are beneficial. If your income is stable and your payment will be reduced to a level you can handle for years then this may be a solution but you must, must, must stop using credit cards and change your habits so that you do not end up deeper in debt.
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See Consumer Credit Counseling & Debt Consolidation
7. What happens when we reach a settlement?
When we feel a settlement is likely to be reached (this depends on a number of things, including timing, how old the debt is and your available funds), we begin negotiations on one or more of your debts. Once a settlement is reached it is approved by you before it is finalized. You then pay this reduced amount to the creditor, usually in a lump sum or over a couple of payments. This settles the debt and eliminates it so you never have to worry about it again.
The settlement is always in writing. You will receive a letter from the creditor stating that they have settled with you for the amount stated on the letter. Once final payment has been made per the terms of the settlement then no further money is owed on that debt. And that is one more debt gone! The creditor will then report this to the credit reporting agencies normally stating that the debt was settled for less than the full amount and that you have a zero balance in regards to that debt.
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8. Can we stop creditor harassment?
If you read books on how to handle debt, they will tell you about a “Cease and Desist” letter that forces the creditor to stop calling you. These work BUT will often lead to legal action so we don’t use them and don’t recommend using them. BEWARE of other settlement companies that state that they can stop all calls from creditors. Yes, it is true that they can with that letter but taking this road often leads to faster legal actions and suits.
A creditor has the right to collect on a debt and will continue in their efforts to do so until such time as that debt is settled. As accounts are generally not settled until they are delinquent 6 months or more, creditor collection efforts may become more aggressive. The volume of calls decrease as we settle your accounts because after an account is settled, no further collection effort is taken on that particular account. Our goal is to get you completely out of unsecured debt, which is a final handling to creditor harassment.
See your rights under the Fair Credit Collection Practices Act
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9. How long will it take to settle my debts and when do you start settling?
Our average client can be debt free in just 25-30 months but this is an estimate and can vary due to a number of factors. These factors include the funds that you have available to settle with, how delinquent your debt is (debts are usually settled after they are delinquent at least 6 months or more) and how your creditors respond
We have many years of experience in reaching settlements. Although we cannot guarantee a reduced settlement in 100% of all debts our average has been around 55 - 65 cents on the dollar, including all payments and fees to completely eliminate the debt.
The point at which we contact creditors varies widely with the strategy for that debt and depending on the creditors you have there may be creditors we do not contact directly but handle other ways.
The time it takes to settle your debts is mainly dependent on two things: your financial situation (the money you have to settle with) and the creditors’ response. Usually things progress but it can happen that a creditor can be ready to settle but your funds are not yet available; or your funds are available but the creditor is not willing to settle at a reasonable amount at that time and will take a little longer.
If a client stays on track and their creditors’ response is about average they can expect to complete the program around 25-30 months. Obviously if your financial circumstances worsen or a creditor is particularly difficult then it can take longer than estimated. Quite a few of our clients finish sooner. Every situation is different and we will be happy to discuss this with you during your free confidential phone consultation. (800) 404-8687
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10. Can you do this on your own?
Yes, this is possible and it can be done if you are tough, persistent and lucky, but the amount saved will not necessarily be less than using a professional. Creditors deal with thousands of people who are in financial difficulty every day and have a vast array of sophisticated (and some rather blunt) methods of intimidating you into financial arrangements you cannot keep. Also, everything you say to the creditor is written down in their computer. You may think that you are being honest or expressing your feelings at a nasty creditor and say something that will prevent a good settlement.
The process is usually very emotional, stressful (especially when it's you who are the one being attacked by collectors over the phone) and time consuming. By letting PBS do what we do best, you will get settlements with considerably less stress. Remember, we have years of experience in dealing with creditors.
Although you could change the oil in your car and probably learn how to fix the transmission, most people would prefer to get on with their own lives and pay a professional to do it.
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11. Interest rates and late fees
The majority of our clients are already at or near the point of falling behind on payments. However, we still need to point out that not only will interest, late and over limit fees continue to accumulate, but also that most banks will raise the interest rates (if they haven’t done so already) when a debtor is delinquent. This can be true for all cards even those you may not have put on the program because they have a zero balance. If payments are not being made, then late fees, penalties and interest may accrue on a debt and you will see the total debt increase before the first settlement.
This increased balance is negotiated in the settlement process, but is important to recognize that the balance can continue to grow until the account is settled. Speed of resolving debt is a factor as the faster one can resolve a debt the more likely one is to pay a lesser amount due to a lower balance. This is why we sometimes wait until after the settlement to collect our fees as you can normally eliminate that debt 2 or more months quicker, reducing the amount owed. This is also why it is so important to go with a program that is under 30 months.
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12. Can you keep your credit cards?
All unsecured debts over $500 has to be included in our program. If all open accounts haven't been closed already, the creditors still may cancel them, as you are delinquent on other accounts. This would also extend to any other lines of unsecured credit you have with that creditor or other creditors. We do not want you to apply for further credit or use credit while on the program.
It was probably the ease of using the cards that got you into trouble in the first place and it is prudent that use of these cards stop. When you have completed the program we want you to be debt free; not stuck with remaining debt, which would probably cause you future problems. If you wish to keep a card for emergency sake it is best to set aside one paid off card, which is separate from any creditor being settled, locked up and secure. As a caution do realize it is possible and within creditor rights to close this card as well.
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13. Is this legal?
Absolutely. This is completely legal. For many of our clients, it is the only effective way of ever getting out of debt. However, PBS is not a law firm and cannot give legal advice. Without the use of debt negotiations, bankruptcy would be the only option left for many of our clients. Through our negotiation efforts, the creditors do recover a portion of the amount owed. So this is a usually win-win situation for both client and creditor.
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14. Will you need to come up with a lump sum?
It is always helpful if you can come up with a lump sum and can speed up the program. We will go over this with you if necessary in the consultation because each client’s situation is unique. Most of our clients, however, are on a limited budget and can only settle one debt at a time. It is mainly your financial situation that dictates how fast we can settle your debt and how quickly you complete the program. In some cases relatives or friends have lent money to help pay off on a good settlement, (say a $10,000 debt down to only $3,000 when the creditor wanted a lump sum payment). We may ask you to look at these options if we can get a really good settlement for you.
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15. What types of debts do we handle?
We deal with all forms of non-secured debt whether it be credit card, store cards, medical bills, disputed bills, personal loans, business debts, etc. Unfortunately we cannot deal with secured debt although we do take secured debt into the equation when organizing your financial plan. We do not negotiate with creditors under $500 (although we must know about them) and you must have at least $10,000 in total debt to qualify for this program.
Please see our Privacy Notice.
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16. Will you sell my name or address to outside parties?
Absolutely not. Under no circumstances is any information that you give us passed on to any other party for any reason. All information is considered highly confidential and personal.
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17. What will happen to your credit report?
PBS is not a credit repair company nor are we trying to improve your credit rating during or after the program. Our goal is to get you out of debt. However, your credit score is made up of 3 parts of which around 35% is the payment history, 30% your debt-to-income ratio and 35% other factors such as new debt, length at job, if you own a house etc. You can get more information at www.myfico.com on how this is based.
When a debt is settled it is normally reported as “settled for less than the full amount” (this is a general wording and it could show differently) and will show as a zero balance. By eliminating your debt, your debt-to-income ratio will dramatically improve thus improving that area of your report. Being debt free does positively affect your rating. However, your payment history will be effected.
Our goal is to eliminate your debt so you can start putting away money ever month. This will allow you to live on a cash bases so you never have to worry about your credit report again.
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18.Will the creditors take legal action against you?
Until a debt is settled, there is the possibility of a suit, a judgment or garnishment. Creditors do have the legal right to pursue a debtor in a court to collect the debt. We have successfully negotiated debts through all phases of a legal action. We are not lawyers and do not offer legal assistance or advice. We always recommend that our clients seek competent legal counsel at such times. (They should charge a reasonable fee for this.) If needed, we can help you to find a local lawyer to assist you with any responses or filings.
In the course of handling a client's debt we can and have gotten settlements at every stage of the legal process of collecting debts. Clients have come to us after receiving summons, judgments/liens and wage garnishments. Even in these cases most of these could be settled, though sometimes at a higher percentage than settlements that have not gotten to this stage. While it is not normal to happen with all cards it has become more and more of a possibility and one should be aware of it.
The settlement is always in writing. You will receive a letter from the creditor or their lawyer stating that they have settled with you for the amount stated on the letter. Once final payment has been made per the terms of the settlement then no further money is owed on that debt. And that is one more debt gone! The creditor will then report this to the credit reporting agencies normally stating that the debt or judgment/lien was settled for less than the full amount and that you have a zero balance in regards to that debt.
Once again, our goal is to settle your debts as rapidly as your resources allow. This ends all collection related activity on a debt.
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19. Will I owe money to the IRS for my reduced settlement?
If your assets (savings etc.) add up to more than your debts you may have to pay Federal/State taxes on your forgiven debt.
The IRS requires that when a creditor reduces a debt by $600 or more that the creditor issues a 1099-C Form (basically a form that states types of income received). The creditor normally sends this form to the IRS and to the debtor.
Most of our clients fall under the IRS definition of insolvency and, as such, it does not effect them as a taxable item. For more information visit the IRS web site at www.irs.gov. Go to “Search Forms” for form 982. The paragraph close to the top of the second page of the form defines “insolvency.”
We do not offer tax advice and you should consult your tax preparer/accountant to see if this would apply to you.
Summery
Basically the reduction and elimination of debt for an individual can be a complex action and unique to each individual's circumstances. Doing your homework and asking the right questions to make sure the company you choose can get the job done is an important step. In particular, beware of companies that charge high fees up front or claim that they can "stop all calls", can settle your debt for unreasonably low amounts and promise to handle any situation or bank with ease. For more information please see the "Choosing a company" page.
We have arranged thousands of fair settlements with creditors that allowed our customers to be freed from crushing debt. We have helped 100s of clients avoid bankruptcy that would have followed them for the rest of their lives. Apart from a small set up fee and a token retainer towards your settlement fees, we do not earn anything until we settle your account. This way we are motivated to get you what we promise - debt free and able to avoid bankruptcy. Contact one of our consultants for more information on how the program works and if it's a fit for you.
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4470 W. Sunset Blvd., Suite 216, Los Angeles, CA 90027
