Being unable to keep up with your debt payments is very stressful. 

Now you get served with a SUMMONS and you are really stressed out!

 For the sake of this article, I'm talking about credit accounts that are     UNSECURED:

   Credit Cards

   Store Cards

   Medical Bills

   Personal Loans

   Pay Day Loans

When you apply for a credit card, store card or any other unsecured account, you are agreeing to the terms to repay this debt.

If you fail to make at least your minimum payments when due, your account will become subject to all collection efforts by the creditor.

These include:

• Phone calls (lots of phone calls)
• Emails
• Mail
  

If these methods do not get you to start making payments again, then the creditor may elect to retain the services of an attorney to file a CLAIM.

Once the CLAIM is filed with your county's courthouse, a SUMMONS is prepared and sent out.

The SUMMONS is usually hand delivered by a courier who is paid to delivery it.   

The idea of the claim/summons is to get your attention...and it works!

Over the years, most of our clients who received a summons call us almost in a panic!

It is because they do not really understand the language of the summons and think all kinds of incorrect thoughts.  

For example...

The summons will state something like:

"You have 30 days to APPEAR and give an ANSWER".

Sounds like you have 30 days to show up in court, but it doesn't.

This language means that if you have undeniable proof that you do not owe what the Plaintiff (creditor) is CLAIMING, you have 30 days to submit to the court your legal ANSWER.

Most of the time you (the defendant) in the claim owes the amount claimed and so giving an ANSWER would be useless.

SO WHAT HAPPENS IF YOU DO NOT GIVE AN ANSWER?

If you continue to read the summons, it says something to the effect that if you do not give an ANSWER, then the Plaintiff may petition the court for a DEFAULT JUDGMENT.

Once a judgment has been awarded to the PLAINTIFF/CREDITOR then they have the legal right to pursue all legal methods to collect on the debt, such as:

               Wage Garnishment

               Bank Levy

               Lien on your home 

Before I continue, let's address those basic 3 options above.

If you are employed and receive W-2 income (income reported by law to the IRS), then a wage garnishment could be sent to your employer.

Your employer has not choice but to comply with the garnishment order or face severe fines!

The employer must send 25% of your NET, AFTER TAX paycheck to the Plaintiff/Creditor until the debt is 100% repaid.

This can be devastating  to someone already have a tough time making ends meet!

Let's say you earn a gross monthly income of $5,000 and after tax, you are bringing home $3,500.

25% of the $3,500 would be $875, leaving you with only $2,625 to pay bills!

That's almost 50% of you gross income!

I'm going to tell you how to prevent that in a minute..

But what about a BANK LEVY?

Sometimes the Plaintiff's Attorney/Debt Collector with send out several bank levy notices to banks in your area.  They use your Social Security number and in most case, will locate your bank.

Now, you go to the store and pull out you debit card to pay, but it is declined.

Calling the bank, you learn that your account has been frozen by the Levy!

Again, devastating!

Yes, the attorney for the Plaintiff/Creditor may choose to file for a lien on your home.

However, this is not used as much as options 1 and 2.

Even if there is a lien placed on your home, it DOES NOT mean that you have to sell your home right now to pay the debt!

It means that if you do not take care of this judgment debt before you sell your home in the future, the title company is forced to repay the lien in order to release the title.

So here is the big question...

HOW CAN YOU PREVENT ALL OF THIS?

DO NOT IGNORE THE SUMMONS!

The creditor wants some kind of repayment plan rather than have to deal with the expense of paying the attorney for the other options.

You should be able to negotiate either a SETTLEMENT, REPAYMENT PLAN, or a STIPULATED AGREEMENT.

While negotiating with debt collectors or attorneys for the creditor can be intimidating, it can be done.

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Trying to decide if you should enroll in a Debt Settlement Program?

Debt Settlement is an option that few people know about.

Did you know that given the right circumstances, most lenders will eventually accept an  amount that much less than the full amount to clear an old account from their books!

I'm talking about unsecured debts like:

• credit cards
• personal bank loans
• medical bills
• store cards
• "pay-day" type loans
• and others

Now, although I've been helping people settle debts such as these for many years, and know that it can really help, not everyone should enroll in a debt settlement program.

WHAT?

Let say you find yourself with $10,000, $20,000, $30,000 or more of unsecured debts and although you are making the minimum payments each month, you are just not seeing the balances reduced due to high interest rates and fees, a DEBT MANAGEMENT PROGRAM may be (notice..."may be") what you need.

You can check out my link above for full details of how a Debt Management Program works, but basically{

• Each of your creditors agrees to lower the interest rate and in many cases stop or forgive late or over the limit fees.
• You will make one payment that is about the same (and sometimes a little more) to the company and they will pay each of your creditors according to the agreements.
• This type of program usually take about 48 months and according to the Fair Isaac Corporation (FICO), being enrolled in a debt management program is NOT a factor in determining your credit score.

But, what if you have a considerable amount of unsecured debt and are just not able to keep up with the minimum payments and cannot afford the required payment of a Debt Management Program?

Many people will seek the help of a bankruptcy attorney, but that is not always the best option.  Yes, bankruptcy is a viable option, but in my opinion, should only be used when you have exhausted every other option!

So, how does a Debt Settlement Program work?

Instead of making any payments to your creditors, you will set aside an amount of money (your budget will allow) into a Settlement Account with an FDIC insured bank.

Of course, since you are not making monthly payments to your original creditors, they will eventually be turned over to a debt collection company.

Negotiations will begin and a settlement agreement will be arranged.  This agreement MUST be in writing and no payments should or will be made without it!

Most debt collectors will be open to a settlement.

So, what should you look for in a Debt Settlement Company?

• How long has the company been in business?
• Are they registered?
• A+ rateing and accredited with the Better Business Bureau?
• Does this company have a lot of complaints?  If so, BEWARE!
• Does the agent really listen, ask a lot of questions to determine what type of help you really need?  Or, does it seem like you are trying to be pressured into signing up right away?
• Oh, and by-the-way, the counsultations should all be FREE!
• Are there referrals or testimonials from formet clients?
• What about seeing some actural settlements? 

Finally....

Dealing with the stress of a financial hardship requires information and help.

A qualified Debt Settlement Company may be just what you need, but you need to do a little homework first!

FREE
Debt Elimination Summary

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If you receive a notice that your wages are going to be garnished, you need to act, and act fast! Here's some helpful tips you can use:

Here at Debt Relief NW, it seems like we get dozens of calls weekly from people who "just found out", that their pay check was going to garnished!

I've highlighted the phrase, "just found out" to make a point:

A WAGE GARNISHMENT DOESN'T JUST HAPPEN!

There is a legal process that must unfold before a creditor or debt collector can receive a writ of garnishment from he court to send to your employer.

I am going to outline, in a nutshell, so to speak, of the process and what you:

• COULD HAVE DONE TO PREVENT IT and,
• WHAT YOU CAN DO NOW TO STOP IT

For the purpose of this article, I'm only referring to UNSECURED DEBTS, such as:

• Credit or Store Cards
• Personal loans (NOT mortgage or auto loans)
• Deficiency judgment after a repossession
• Medical bills
• Private student loans

OK, let me lay out an example (based on over 15 years of helping people with their debt issues):

I'll call him Joe.  Joe has a decent job and earns about $20/hour.  At 40 hours a week and an average of 4.2 weeks/month, his GROSS (before taxes and deductions) is $3360/month.

Of course, after taxes and other deductions, his NET INCOME ("TAKE HOME")  is only about $2352 (approximately 30% less than his Gross Income).

He is renting an apartment and has all of the usual bills.

His total budget or outgo is about $2100 a month, leaving him barely $250 for emergencies, etc.

Included in that budget is about $15,000 of credit card debt spread over 3 cards:

• Visa                 $8,000
• Master Card    $6,000
• Home Depot    $1,000

The total monthly MINIMUM PAYMENTS on all add up to $300/month.

Joe is having a very difficult time making the $300/month, minimum payments and then, he is working around the house and falls off a ladder and breaks his leg!

His insurance policy doesn't provide for any "disability income" for the accident, so not only is he going to be off work for about 3-4 months, he doesn't have any means of income.

Fortunately, he had a little savings account, but it wasn't enough to cover all of his monthly budget.

So, Joe does what thousands of people do every day, he pays all of the most important bills, like his rent, utilities, groceries, etc. and let's the credit card bills get behind.

NOW WHAT?

After he misses a payment or two, he starts to get letters and calls, lots of calls!

At this point, Joe can't do anything about the annoying calls, because as long as his account is still with the original creditor, they have the right to call him about it.

But, once the account is charged off, sold, or transferred to a collection agency or other third party, then he can put a stop to the calls!.  (I'll show you how in just a minute.)

Of course, Joe tries to explain to the caller what he is going through and they may or may not offer some kind of "HARDSHIP PROGRAM"  to help him through this.  But, it really doesn't matter as he just will not be able to make any payments until he is back to work and get some other bills caught up.

NEXT...

The original creditor(s) will most likely charge off, sell or transfer the account to a collector after about 120 days of so if nothing can be arranged.

So now, Joe starts getting letters and calls (LOTS OF CALLS)  debt collectors!

He'd like to make some kind of arrangement with them, but they are demanding full payment on the balance or else!

At this point, he can put a stop to these calls.  Here's how:

But, even though the calls are stopped and he is just "ignoring" the letters, the debt is not going to go away.

THE DEBT COLLECTOR DECIDES TO FILE A CLAIM

If the debt collector is unsuccessful in getting you to start making payments, then the debt collector may decide to start the legal process of obtaining a judgment.

An attorney for the collector will FILE A CLAIM at the courthouse of the county where you reside.

This CLAIM will generate a SUMMONS that will be delivered to you, usually in person, but sometimes by registered mail.

I'm not going to go into all of the details of what to do with the SUMMONS here, but you can check out a blog I've written that will be very helpful called:

WHAT TO DO IF YOU RECEIVE A SUMMONS.

But, please DO NOT IGNORE THE SUMMONS!

The fact that the collector decided to file a CLAIM proves that they are very serious about collecting on this debt.

If you ignore the summons, then a court date will be scheduled (you don't have to go), but a representative from the collector (now called the PLAINTIFF) will show up and the court will award them a DEFAULT JUDGMENT.

It's called a "default" judgment because no one contested it and they won by default.

NOW WHAT HAPPENS?

Now, the PLAINTIFF ( the collector) can apply for a WRIT OF GARNISHMENT.

The Writ of Garnishment is sent to your employer and they, by law, must obey the writ and withhold up to 25% of your net, after-tax, income.

Joe has just gone back to work and then he get's this notice from the payroll department that he is being garnished...and he starts to panic, which is understandable!

Remember when we did the math earlier about what his actual "take-home" or "after tax" income was?

That amount was $ 2,352.

Most states allow for up to 25% of the net, after-tax check to be deducted and sent to the creditor until the full balance (inflated now with interest and legal fees) is repaid!

WOW...WAIT A MINUTE...

$2,352 X 25% = $588 will be deducted from Joe's Net Check!

He could barely make it on the $2352, and now he has to somehow make it on $1764!

Yep....PANIC!

OK, so Joe's really in trouble, you get it...

How did this happen and what can he do about it now?

Joe could have stopped this "process" and ultimate JUDGMENT by trying to work out a SETTLEMENT PLAN with the debt collector.

Most debt collectors would much rather accept less than the full balance than go to all of the time and expense to seek a judgment:

When Joe received the summons, he could have contacted the attorney for the collector and most likely worked out some kind of repayment arrangement that may have included a reduced settlement!

Once the judgment was awarded and the plaintiff had spent more money in legal fees, they went after the garnishment.

But that doesn't mean that you still could not work out something to stop the garnishment!

You may be able to get them to stop the garnishment and take a more "reasonable" amount to repay the debt.

Depending on the circumstances, you may even be able to not only stop the garnishment, but also get a reduced settlement.  Each case is a little different.

If this help, great.

If you find it a little "over-whelming", then maybe we can help:

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Making the decision to enroll in a Debt Settlement Program brings a whole lot of different things to prepare for and get comfortable with. 

After 15 years of helping people manage their debt issues, let me share with you some things that will really help!

People decide to enroll in a Debt Management Program such as Debt Settlement after a careful examination of their individual financial and personal situation.  We always carefully walk our potential clients through their various options to make sure they choose the best one for them.

Although there could be many other reasons, most people have experienced one or more of the following:

• Unemployment for too long a time
• Divorce
• Major accident or illness
• Death of spouse or partner
• Retired with too little income
• Disability

Again, many people turn to the easily available credit of a credit card, pay day loan, or some other "quick fix" solution with the intention of paying these off as soon as things turn around.

I can't remember anyone that sought our help that had just foolishly spent and spent and spent and now was not able to keep up.  I'm sure that happens, but that's not the normal Debt Settlement Client.

So here you are...

Several unsecured accounts (may also include medical bills and judgments) where the minimum monthly payment is just too large for the current income you have coming in.

Let me walk you through the basic process of the Debt Settlement Program:

When you miss (or start missing) the minimum payments due on your credit accounts, you most likely will get a letter or even a phone call from your creditor.

At first, they seem pleasant and willing to work with you, but as time goes by, their attitude and tactics change.

Now the letters seem very "threatening" and "demeaning" and the phone calls keep coming more often.

When a creditor calls, don't forget that the caller has been trained to say and do whatever they can (hopefully within the laws of the Fair Debt Collection Practices Act) to get you to start making payments again.

If you are not in a position to get caught up on your outstanding/delinquent debts, then I advise that you just ignore the call (learn to use caller ID!) or just hang up if you pick up by mistake.

I know this sounds harsh, and some other Debt Settlement Companies my suggest that you try to explain your situation, but years and years of working with people deal with debt collectors has taught me that is is usually a waste of time!

Oh, and by-the-way, as long as your account is still with the original creditor, they have the legal right to call you. Now, they are not supposed to call every hour or so and they are limited to the times of day, but at this point, I still advise that you just ignore them for now. (I'll show you how to put a stop to them just a little later.)

So, what's next?

After a while, maybe 3-4 months of this, your accounts will most likely be charged off and/or assianged or sold to a debt collection agency or debt buying agency.

"Charged off" means that the creditor is going to claim that they could not collect on this debt and they will "write it off" as a loss for their annual tax reporting.

TIME OUT...

About 99% of our clients ask, "What's this going to do to my credit?"

There is some great information about how your credit report and credit scores work.  I'll give you a summary here, but it would be well worth your time to visit this site:      MyFico.com

I know you are concerned about your credit score, but at this point, by being late, having too much debt and using too much debt, your credit scores are going to go down (if they haven't already).

The fact that you have gotten "in over your head" credit use wise, but, have taken the steps to do something about it (like debt settlement), will in the long run improve your scores.

Right now, the goal of the debt settlement probram is to help you avoid wage or bank garnishments due to judgments and/or avoid being forced to seek bankruptcy protection from your creditors.

Once you/we have successfully negotiate all of your accounts to a $0 balance, your credit score will improve.

Having your account "assigned" or "sold" to a collection agency, sounds very bad, but actually, for your debt settlement program, it is good.

Once your account(s) have been turned over to a collection agency, the negotiation process really starts. 

Now we can demand/put a stop to the calls.  I do this for my clients, but you can do this yourself.

Here's how:

Now, once in a while the orgingal creditor may send you letter stating that they would be willing to settle you account for such-n-such, but not very often. 

If you get such a letter, be sure to forward it to the Debt Settlement Company right away as they may be able to get an even greater reducion/settlement for you!

Here's a good place to explain what your responsibility is while enrolled in a settlement program:

1. Don't speak with the crediors or debt collectors as this actually hinders your negotiator in reaching good settlements.
2. While your account is with the original creditor (Visa, Home Depot, etc.), you really don't need to send every monthly statement.  One about every 3 months is fine.
3. But, when the account is transferred to a debt collector, you need to scan or fax the most recent letters you receive each month.  This is VERY IMPORTANT!  I have had many client's fail to send me very good offers until a couple of months after receiving them.  When I called on the offer, the account had been recalled by the creditor and now we have missed a very good opportunity.

How settlements are negotiated:

You've been making deposits/contributions into your Reserve Account help by an FDIC bank through your Debt Settlement Company for a few months now.

Obviously you don't have enough built up to settle all of you accounts, but your negotiator will try and negotiate a settlement with the company that is willing to give you the best settlement.

Most debt settlement companies will not make offers for settlements until they have a very large lump sum of money to offer.  However, I have found that fair settlements can be negotiated and paid out over several months at now additional interest.

After the settlement has been completed:

Once the terms of the settlement have been completed, the debt collection company will send a letter of statement stating such.

They are supposed to send update information about this account to the 3 major credit bureaus (Experian, Equifax and TransUnion), but about half the time they don't!

I have our clients wait about 2-3 months after the settlement has been completed to request an Credit Report on themselves.  It's not difficult and it can be FREE.

The law allows for each of us to request and receive a credit report on ourselves annually.

For a FREE copy (no scores) go to www.annualcreditreport.com. 

You will asked a few security related questions, but should be able to get your credit report without too much effort.

You can get a more detailed report including your credit score from a number of sites, such as:

Credit Karma  or   several other sites

If you find errors, ie. they have not been updated since the settlement was completed, you can open a DISPUTE and in most cases, the error will be corrected in 30 days or so.

So, in a nutshell, that's how a debt settlement program works.

If you have questions or would like to learn more, let us know:

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When a debt is settled (IRS says, "forgiven") for more than $600, you may receive a form 1099C that seems to say that you are going to have to pay more tax!  Here's what you need to do to have the "forgiveness" excluded as additional income:

(Let me start out by stating that I am not an accountant or attorney.  I have been helping people deal with creditors, debt collectors, and attorneys for the creditors for many years and have tried to provide assistance to them or their tax preparers in how to deal with a 1099-C form.  So, please consult yours!)

Now, in this article/blog, I'm talking about dealing with a 1099-C that you may (or may not) receive after an unsecured debt such as credit cards, personal bank loans, medical bills, etc. has been settled for less than the balance.

By the way, don't be surprised that your tax preparer or accountant is not quite sure what to do with the 1099-C!  Or, be careful if they just say that you have to include the settled/forgiven amount as additional taxable income without seeing if it can be excluded!!!!

ALSO, DO NOT IGNORE THE 1099-C, even if you receive it AFTER you have filed!

 If this happens, you may have to file an amended form.  You accountant or tax preparer will help.

Ok, so you have received the 1099 C.... NOW WHAT?

To help you, here's an actual copy of a 1099C one of my client's received for a debt we helped settled in 2015.  (The 2016 1099C's are not out yet, but will be the same.)

Click on the form below and print a copy so you can follow:

1099C Form 2015

It shows...

• The name of the creditor... Capital One
• Client's personal information (I've blacked out for privacy of course)
• Date of the settlement... 1/3/15
• Amount of the canceled debt (amount forgiven)    $1,463.68
• Debt Description... Credit Cards and Loans
• 1099-C Instructions for Debtor

The actual balance at the time of settlement was $ 3,440 and the total settlement was for $1,500.  Even though this was a reduction of $1,940, the creditor has excluded the added interest and fees in reporting the settlement to the IRS.

Look carefully at the bottom of the form and you will see,

"However, according to IRS Pub. 4681, you may not have to include all of the canceled debt in your income.  There are exceptions and exclusions, such as bankruptcy and insolvency."

Do you see the word, "INSOLVENCY"?  This is the key to the whole matter.

It means that if at the time the settlement was completed, if your liabilites (all outstanding debts including the one that was settled) were greater than all of your assets (equity in your home, car, cash, bank accounts, etc.), then, according to the IRS, you were INSOLVENT.

So how do you show/prove to the IRS that you were insolvent at the time of the settlement?

You are going to file IRS Form 982 along with your tax return. 

But first, you are going to have to do a little "homework"... relax, it's easy...

Although it is not necessary, I advise my clients to write out a BRIEF, LEGIBLE explanation of their situation at the time of the settlement.  Again, you don't have to use word processing, but make sure you write very clearly.  Something like:

John Smith  SS # 123-45-6789  234 Main St.  Big City, OR 97033

I lost my job in August of 2014 and did not find employment until a year later.  My wife was also very ill at that time. 

We used credit cards to try and make ends meet, but ultimately were unable to keep up with the payments.  Rather than file for bankruptcy, we tried to negotiate with our creditors for a reduction of the balance.

As you can see from the Assets vs. Liabilities worksheet I've attached, we were in real financial trouble and/or insolvent.

Next, complete a brief worksheet listing your Assets vs. your Liabilities:

Example:

Assets:                                                            Liabilities:

FMV of home         $ 225,000                          Mortgage   $190,000   2nd   $20,000

FMV of car             $    5,000                           Student loans         $27,000

Personal Items       $    5,000                           Medical Bills           $  4,000

                                                                     Credit Cards           $ 31,000

Total Assets:        $ 235,000                          Total Liabilities:       $  272,000

                                  Net Worth:     negative  -$37,000

Now you are going to fill out IRS Form 982 (really, really simple!!!)

For credit card and other unsecured debts, you only have to deal with Part I.

• Check the box on 1,a
• Fill in the amount of forgiveness from 1099C on line 2  ( 1463.68 )

That's it!  Nothing to it!

Now, MAKE A COPY OF EVERYTHING....

• The 1099-C
• Your brief explanation of financial hardship
• Your Assets vs. Liabilities worksheet showing Insolvency
• Completed IRS form 982

Finally...

Attach/include, all of the above with your tax return.

If you need more help, click below:

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If a creditor settled or wrote off a debt for you in 2015, you may get a 1099-C.  Here's what you can do to avoid paying any additional tax...

Debt settlement is an option that we use and you can use to help avoid bankruptcy and become free from the burden of too much debt.

Basically, is a debt settlement, the creditor or in most cases a debt collector who has purchased the debt agrees to accept an amount far less than the actual current balance.

If the "forgiven" amount is greater than $600, then the creditor or debt collector may report it to the IRS.  They don't do it in every case, but you need to be aware of what to do about it if it happens to you!

There a couple of different looking 1099-C forms.  Here is an actual form one of our clients received and I'll walk you through the process of how to file the proper forms to exempt the settlement/forgiveness when you file your taxes.

Here is an actual 1099-C one of our clients received.  Click to view:

1099-C

The actual balance at the time of the settlement was $3,041 and the settlement was for $788, saving this client $2,253!

The 1099-C reflected this and you can see that in box 2, the amount is being reported as "Amount of debt canceled".

If this client did not file the proper forms with her 2014 taxes, she would have had an additional $2,253 added in as additional income and based on her 30% tax bracket (average net federal), she would have to pay an additional $676 of tax!

Here's what she did:

According to IRS publication 4681, she needed to prove that "at the time of forgiveness (settlement), she was INSOLVENT.

All she (and you) needed to do was to list all of her assets vs. liabilities to see where she stood.

This doesn't have to be a "fancy" spreadsheet or anything, but just write down (again, at the time of the settlement/forgiveness) your assets/equity on one side and your liabilities/debts on the other.

Something like this:

                      Assets:                                           Liabilities:                                  

         Home value:          $  0 (she rents)          Credit Cards total (including this debt):    $15,000

         Auto value today:   $ 5,000                      Auto loan:           $1,000                            

         Savings:                 $    250                      Student loan:      $ 10,000

         Personal assets:    $ 2,500                      Medical bills:       $     500

         Total Assets:          $ 7,750                      Total liabilities:     $ 26,500

It is clear that her Liabilities were greater than her Assets, therefore the amount forgiven should be exempt from taxation. 

NEXT:

She downloaded IRS Form 982 and followed the simple instructions we gave her:

In Part 1, on line 1a, she marked the box with an "X".

In the same Part 1, on line 2, she wrote in the amount that was forgiven, $ 2,253.

That's all on the Form 982. 

NEXT.....

She could have just included that with her tax return and in most cases, that would have been sufficient.  But, I recommend writing a brief, legible explanation of what caused your situation, etc.  Again....very brief neatly written (doesn't have to be typed).

Something like this:

In 2014, I was laid off from my job of 15 years!  As I looked for work, I had to rely on credit to get by.  When it got to the point that I just couldn't keep up with the payments, I considered bankruptcy. 

Fortunately, the bankruptcy attorney I went to see referred me to a Debt Management Company who helped me pay off and/or settle my debts.

Finally....

You have:

• Asset vs. Liabilities worksheet
  
• IRS Form 982 completed (yep, just two boxes)
• Brief, legible handwritten explanation of your circumstances

Now....

• Make a copy of these along with your tax return for your files.
• Mail your tax return along with the documents above.
• That's it!

If you would like more information or need any help, click below:

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Three years ago we were facing bankruptcy.  We decided to use a Debt Settlement Company.  Now we are Debt Free, our Credit Score has improved and are in control of our financial lives again!

BACKGROUND....

My story is probably much like anyone who has had to face the prospect of bankruptcy!

I had been employed with a fairly large company for about five years.  The pay was decent and although I can't say that I "loved" my job, I didn't "hate" it either.

Rumors had been circulating about a possible sale of the company to a larger competitor for about 6 months, but I was told "Don't worry, you'll be OK".

Well, one Friday afternoon, my supervisor called me into his office and let me know that the sale was going to happen and that the new company was going to close down my division.

Then I heard those dreaded words..."I'm really sorry, but we are going to have to let you go."

Talk about a shock!  All I could think of was...

NOW WHAT?

I'm married with two kids (ages 6 and 8).

My wife doesn't work because her net take-home pay would barely pay for day care, so why bother?

So here I am:

• Unemployed (for the first time in my life!)
• Mortgage
• Family
• No real job prospects!

The company had some counselors available for job searches, etc., but after my session, I knew I was in trouble!

I signed up for unemployment and hoped that I'd find a job before the benefits ran out....wrong!

We had very little savings.  Well, I probably shouldn't call it a "savings account" because we really just transferred some money from checking just to keep it "out of reach" until an emergency came up.  Seems like those "emergencies" always came up!

JOB SEARCH, BILLS, and STRESS

At first, I wasn't really worried because I thought I would be able to find another job rather quickly.  Boy, was I wrong!

I sent out dozens of resumes and went on several interviews, but no luck.

We had used the "savings" up a couple of months ago when the hot water heater stopped working.  The plumber said that there was nothing he could do to repair it as it was just too old, had rust, and parts where very hard to find!

So, I used one of my credit cards to buy a new one and pay for the installation.  

Even though the total was about $800, it really only increased my minimum monthly payment by $25 or so.

The unemployment finally ran out and I had to take a job at just a little over minimum wage.  It was better than nothing, but the final take home pay was just not enough to cover everything.

I was really beginning to stress out!

CREDIT CARDS TO THE RESCUE?

As time went by, I continued to not only send out resumes and work at my job, but the bills started piling up.

My wife and I decided to pay only the absolute essential bills like the mortgage, utilities, groceries, etc. and let the credit card bills, medical bills, and yes, even the car payment get behind.  

As the total credit card debt was increasing due to late fees and over-the-limit fees, we had to use a CASH ADVANCE once in a while to pay a utility or grocery bill.

The crazy thing was, even though we hadn't made a payment in 3-4 months, we would still get an OFFER from a credit card company for another card or to make consolidate the others with a BALANCE TRANSFER.  We had three cards from one company!  

Made no sense!

Sure, this "rob Peter to pay Paul" action was holding them off, but we knew that a "day of reckoning was coming!"

DECISION TIME!!!

The total credit card and other unsecured debts was now so high that we knew we couldn't keep up.

It looked like BANKRUPTCY was our only option until we learned about DEBT SETTLEMENT.

We weighed our options and decided to give Debt Settlement a try and use Bankruptcy as our last resort!

At first, we tried to contact the debt collectors ourselves, but soon learned that they did not care about our situation and were unsympathetic and rude!

Even though they were willing to discount the total amount due, they wanted it all in lump sum by the end of the month!

Right.... We can't keep up with our payment now and yet we have two or three thousand dollars laying around to send them!

We realized that since we were dealing with professional debt collectors we should consider retaining a professional debt settlement company.

CHOOSING THE RIGHT DEBT SETTLEMENT COMPANY

We did the normal "searches" online and soon found out that there were a lot of debt settlement companies out there!

Since they all seemed to offer the same services, we decided to narrow the field by using the following checks....

• Their Better Business Bureau record
• Registration with our proper government divisions
• Examples of actual settlements for their clients
• Positive testimonials from satisfied clients

It was very evident that not debt settlement companies were the same!

They ranged from being very pushy, trying to rush us to make a decision, to those who seemed to have very inexperienced reps who obviously had not much experience with our problems.

We finally found a company that seemed to not only really know what they were doing, passed the criteria we mentioned above, but demonstrated empathy for us and our situation.

THE PROCESS

Once we enrolled, the first thing they did was to put a stop to those annoying and basically harassing calls from the collectors!

Even though one or two collectors still tried to call, our company contacted them and those calls stopped immediately.  It felt so good to not have to deal with those debt collectors any more!

As time went by, the monthly deposits we made to our reserve account began to grow.  At the same time, the debt settlement company was negotiating our accounts.

One by one, they accepted a settlement agreements that averaged around 50% or less that the current balance.

THE RESULTS

The total debt settlement program took a little over 3 years, but it was worth it.

Through the debt settlement program we accomplished our goals:

• We were able to stop worrying so much about our debts
• We did not have to file for bankruptcy
• We avoided wage garnishments or a levy on our bank account
• Our credit scores are starting to increase

As I said before, debt settlement is not for everyone, but for us, it worked better than we expected and now we are DEBT FREE!

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