Frequently Asked Questions
What is Debt Settlement?
Debt Settlement is the process of negotiating a reduction in the outstanding creditors claim for a debt. The amount of the settlement varies and is entirely based on your personal situation; in most cases our clients see a 40-60% reduction.
Do you begin negotiating with my creditors right away?
The actual negotiation activity is typically very limited until you have saved up enough in your settlement account to make reasonable offers to your creditors. Most creditors do not want to spend time negotiating unless they know there are funds available. The first settlement typically happens in month 6 to 10 of the program but this varies and depends on your budget, and the number of creditors you have enrolled in the program as well as the balance of each debt owed.
What is the timeline of events in this program?
After completing your enrolment forms and returning them to us with your statements, your debt consultant will call you to review how the plan will be handled and to answer any further questions you may have. You will be sent a welcome package which you are required to read along with some forms we will need completed to settle your debt. The welcome package will also include your login ID and password for your on-line access to our website. Throughout the program, we will be in contact with you as required to negotiate the settlement of your debts with your creditors. The plan will run for the prescribed period of time arranged during your consultation to fit your budget.
Is your program the same as a debt consolidation loan?
No. We negotiate with your creditors to reduce and eliminate your debt with a lump sum payment. The amount you owe is actually reduced before the payment is made. If you currently owe $25,000 and we arrange a 40% settlement you pay $10,000 directly to your creditors. A debt consolidation involves getting a new loan to pay off your debts. Because of your risk factor to the lender this often involves a very high interest rate approaching 30% and/or the requirement of a co-signer. You cannot borrow your way out of debt in most cases.
Is your program the same as credit counselling?
No. Credit counselling will pay off the debt in full and hopefully at a reduced interest rate. It will usually take 5 years to pay off the debt which is substantially longer then our longest 3 year plan and as a result much more damaging to your credit rating. Credit counselling companies charge a monthly fee and can be partially funded by your creditors; the very people you owe the money to. For more information on credit counselling visit Credit-Counselling – What-You Need to Know Before You Sign-up
What kind of debt can and cannot be settled?
This program works with all unsecured debts like credit cards, department store cards, gas cards, personal loans and lines of credit. This program does not work with secured loans like automobiles and, mortgages. It is not for, utilities, pay day loans, child support, student loans and taxes.
Is there a service guarantee?
Yes. We guarantee a settlement or you pay no fee. If we cannot negotiate a settlement on a debt you will not pay a fee for that debt enrolled.
Are you lawyers?
No, we cannot give financial or legal advice and suggest seeking the advice of a licensed expert if needed. The information provided does not constitute financial or legal advice and should not be used as a substitute for the counsel and services of a licensed expert.
Can I be sued by a creditor?
Yes, but this is highly unlikely for our clients. We can only accept you into our debt settlement plan if you are in financial hardship and already behind in your payments. We cannot guarantee that legal action will not be taken against you but, we strictly screen our clients to minimize the likelihood that our client would be the target of legal action. Creditors are aware that seeking a legal remedy against someone in legitimate financial hardship can result in a client filing for bankruptcy; most creditors prefer to accept settlements instead of legal action. The bottom line is if you are in breach of any contract you are exposed to a lawsuit. This includes not paying your debts on time.
What are your qualifications?
We are comprised of a team of dedicated and trained professionals with certification and training in debt reduction. Our founder alone has over 14 years of credit and collection experience gained in management capacities in some of Canada’s largest collection agencies. We are also certified by the IAPDA (international association of professional debt arbitrators) as certified debt arbitrators. Our staff negotiating settlements for the mortgage community are also required to complete the FSU101 (financial services underwriting course for mortgage brokering) course for greater proficiency when the settlement money is coming from the proceeds of mortgage refinancing.
What are my responsibilities throughout the debt settlement program?
Your main responsibility is to restrict your spending, follow the budget we lay out for you and to make your monthly payments as planned. Negotiating settlements to all your creditors successfully requires that you work closely with us and that you follow the planning, and adopt the strategies we lay out for you while sufficient funds accumulate for us to negotiate your settlements.
Can I apply for other credit cards while enrolled in your plan?
No. You are seeking the help of our company because you are declaring financial hardship and unable to resolve your debt. Creditors will ask themselves “If this client is having trouble with their debt, why are they applying for more credit cards when settling their debts?” You cannot apply for new credit cards until you have resolved all the debts you enrol with us.
Does my debt have to be in a collection agency to be included in your program?
No. Our program works for debts in all stages of recovery.
How does your program affect my credit rating?
When you do not make the required minimum payments to your creditor your payment history will be reported to consumer reporting agencies as a late, delinquent, charged-off or past due balance. This is true whether or not you enrol in our debt settlement plan. Our goal is to get you out of debt for the lowest cost, in the shortest period of time without declaring bankruptcy. We have shown that our program is better for your credit then bankruptcy or credit counselling services. Most clients see a 20-25% increase in their credit score in the 12 months following the last settlement. Once you have paid the settlement your creditors and the collection agencies will cease the collection activity which will have a positive effect on your credit rating. There are techniques you can adopt to further boost your credit score post settlement. This information will become available to you once all the debts have been resolved if your goal is to re-establish your credit rating.
How is the service fee paid?
Our fees are paid in easy monthly instalments; they are withdrawn from your account each month by electronic funds transfer. Typically our fee is spread out over the length of the plan. All fees we quote include the GST and are included in the total monthly budget.
Who controls the account where I am saving funds for creditors?
You do. The account is set up by you in your name and the money in the account is your money. The reason why we recommend keeping it in a new account that is separate from your existing bank accounts is that in our experience, this separation dramatically increases (by a significant factor) the probability that you will succeed in our program. We only withdraw our monthly service fee from your selected account but the accumulated savings in the account are owned by you.
Do you pay my creditors?
No. Once we negotiate the settlement you will make the payment to the creditors. We do not handle your money. The purpose of our arbitration program is to act between you and your creditors to negotiate a settlement on the debts. Once we have a negotiated a settlement we get the deal in writing, and provide easy payment instructions to you.
I own a home with equity. Can this be used to help with the settlements?
Yes. If you have available equity we may be able to enrol you into our FAST Track plan and help you use it as a means to gather money for a settlement more quickly. People that qualify can be out of debt in 4-6 weeks this way. We have affiliations with several mortgage agents across Canada that refinance equity for people with bad credit. Having access to a lump sum is the quickest way to settle and retire all outstanding debts.
Will this affect my mortgage?
Provided your loan-to-value is high then no. In our experience, we have not seen anything happen to someone’s mortgage. If you have substantial equity in your property, your creditors will expect you to make the effort to access it and use that money to settle your debt. Our debt consultants ensure this topic is discussed so you don’t expose your home to a lawsuit.
Can I get credit after the program ends?
Yes. You can get credit after going through the program by starting with a secured credit card.
What is your interest rate?
We are not a loan company; therefore we do not charge interest. Any interest charges you may incur as the result of a mortgage or loan are charged by the lender.
How much money can I save?
In extreme hardship situations, sometimes you can save as much as 90% of what you owe. Our clients see balances reduced to an average of $0.40 for every $1.00 owed. Factors that influence this include: who the creditor is, your situation, the date of last payment, the nature of your balance and your own personal hardship.
Do I put all of my credit cards in the program?
The program will not work well unless you enrol all of your high balance (greater than $1,000) credit card accounts. As you can imagine, it makes it difficult for us to negotiate with your creditors if they can see that you are keeping other accounts open and paying those accounts in full.
Will I still be able to use my credit cards?
No. The accounts you enrol will be closed during and after the program.
Will I get collection letters from a bill collector?
Yes. Creditors almost always send collection letters. They are typically sequenced to increase in the level of threat as the debt ages. These are automated letter campaigns sent to millions of people every month to scare you into paying. You will save the letter in your file and when sufficient funds are available to settle we may require a copy for reference.
Will I receive phone calls from bill collectors?
Yes. Bill collectors will almost certainly attempt to contact you. There are provincially written collection agency acts that are designed to protect your rights as a consumer; within these acts are provisions which are designed to stop collection calls. We provide plenty of support in this area to help you minimize harassment. Our goal is to get your creditors to call us and not you when they want to ask for money, and we will work with you minimize any calls that get through to you. However, this can take some time. When the money to settle is available and we deal with the collection agencies, we will request that all communication involving your accounts be directed to our offices. Original creditors, on the other hand, can continue to call if they so choose. However, some original creditors will abide by a request not to call and respect your right to privacy. We will send you instructions on what to say and do to make them go away. Bill collectors are commission based telemarketers trying to make a sale, just like any other phone solicitation. They are selling you on the benefits of paying them in exchange for them not harassing you anymore. For more information on bill collectors in Ontario visit Bill Collectors – The 7 Biggest Lies
Do interest and late fees accrue on my accounts?
If you let your accounts go delinquent, your creditors will continue to add interest onto your balances. Keep in mind that the interest is going to accrue regardless of whether you make minimum payments or not. Our goal is to negotiate substantial reductions to the balances on your accounts, even after the interest has accrued.
Why can't I just settle my debts on my own?
You can. But do you turn to an accountant when you need help with your taxes, a lawyer when you need counsel and a chiropractor when your back hurts? Most people seek professional help when they want it done right. We ensure the settlement is accepted so they can’t come back and bother you for the difference and the savings are always significant. Negotiating debt takes tremendous resources and even after the creditor and our fees are paid you often save 40-60% on what you originally owed. Attempting this on your own may take a long time and at the end of the day you may only realize a very small savings. Trust the experts here and get it done right the first time with Total Debt Freedom.
Will I still be eligible for bankruptcy if I lose my job or if my income changes and my financial situation worsens?
Yes. Bankruptcy is still an option. However, it is important to note that any money paid into your program up until that point will be gone forever. Bankruptcy should only be considered if your financial situation worsens and you are no long able to follow your budget.
How do I get started?
For Immediate attention contact us toll free at 866-833-1992 and we will be happy to answer all of your questions. There is no risk, cost or obligation to speak to us about living your life Totally Debt Free.